China’s industrial profit growth moderates amid patchy recovery

BEIJING, July 27 (Reuters) – Profits of China’s industrial companies showed solid, if slower, growth; Export resilience helped cushion weak domestic demand, highlighting the economy’s uneven recovery despite efforts by policymakers to stimulate consumption.

Exports and industrial production have done most of the heavy lifting for the world’s second-largest economy. But persistent weakness in consumer and property sectors helped drag second-quarter growth to its slowest pace in more than three years and kept alive calls for “more policy support” to address economic imbalances.

Industrial profit growth fell to 15.1% in June from 21.1% in May, while first-half profits rose 18.7% from a year earlier, compared with an increase of 18.8% in the January-May period, according to data released by the National Bureau of Statistics (NBS) on Monday.

The figures reinforce evidence of a two-speed recovery in which manufacturers are benefiting from strong overseas demand while sectors reliant on domestic spending continue to struggle.

Car sales fell for a ninth consecutive month in June, while auto manufacturing profits fell 19.5% in the first half of the year, underlining the woes in the domestic market, NBS data showed.

Attention now turns to the Communist Party’s Politburo meeting at the end of July, a key policy-setting meeting where investors will look for signals of additional support measures.

However, expectations for a broad-based stimulus package have been tempered by the resilience of exports and Beijing’s preference for targeted expansion.

Industrial profit figures cover companies with annual revenues of at least 20 million yuan ($2.95 million) from their main activities.

($1 = 6.7728 Chinese yuan)

(Reporting by Qiaoyi Li and Ryan Woo; Editing by Thomas Derpinghaus and Jacqueline Wong)