China's industrial profits jump 3.6% in June despite economic struggles

China's industrial profits surge: China's industrial profits accelerated in June, according to data released on Saturday, despite ongoing economic struggles. Profits rose 3.6 per cent year-on-year (YoY) in June, a notable increase from the 0.7 per cent growth recorded in May. 

For the first half of the year, earnings were up 3.5 per cent, improving from a 3.4 per cent rise during January-May, as reported by the National Bureau of Statistics (NBS).

Revenue up from production

NBS statistician Wei Ning highlighted that strong industrial production growth and a notable easing in factory-gate price declines since the second quarter have bolstered corporate revenue. 

However, Wei also pointed out that weak domestic demand and a challenging international environment are putting pressure on business performance.

This positive data stands in contrast to a broader economic slowdown, which saw the second quarter's growth fall short of expectations. The consumer sector has struggled with job market issues and a persistent housing downturn.

Notably, around half of the mainland-listed alcoholic beverage companies forecasting earnings for the first half of the year anticipated losses. 

Yet, despite rising trade tensions with the West, optical transceiver firms Zhongji Innolight and Suzhou TFC Optical Communication, which supply US chip giant Nvidia, projected significant gains in their first-half earnings due to the global AI boom.

Unscheduled lending operation

In response to the fragile economic conditions, China has introduced additional monetary stimulus measures. On Thursday, the central bank conducted an unscheduled lending operation with sharply lower rates, following recent cuts to benchmark lending rates. 

Additionally, the government unveiled plans to use around 300 billion yuan in ultra-long special treasury bonds to support a nationwide equipment upgrade and consumer goods trade-in initiative.

The NBS data also showed varying profit trends across sectors: state-owned enterprises saw a 0.3 per cent increase in profits for the first half of the year, foreign firms enjoyed an 11 per cent gain, and private-sector companies experienced a 6.8 per cent rise.

Industrial profit data pertains to firms with annual revenues of at least 20 million yuan ($2.75 million) from their main operations.

(With Reuters Inputs)