China industrial profit growth slows again in June as retreating oil prices sap earnings lift — SkimNews
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- China's industrial profits rose 15.1% year-on-year in June, down from May's 21.1% gain and marking a second consecutive month of deceleration, per National Bureau of Statistics data released Monday.
- First-half 2025 profits climbed 18.7%, a slight slowdown from the 18.8% pace recorded through May, though still a sharp turnaround from barely positive growth in 2025 — helped by favorable comparisons with last year's -2.8% H1 decline.
- The earnings rebound has been driven by an AI-fueled boom in chip and equipment manufacturing and the end of nearly three years of factory-gate deflation, though economists warn much of the price recovery came from surging global energy costs while domestic demand lags.
- Producer prices dipped 0.3% month-on-month in June — the first decline since July 2025, per LSEG data — as normalizing tanker flows through the Strait of Hormuz pulled oil, refined-fuel, and petrochemical prices lower.
- Q2 factory-gate prices still rose 3.6% year-on-year, the first positive reading since late 2022, though the article characterizes the reflation boost as "wobbly."
- Morgan Stanley chief China economist Robin Xing expects the late-July Politburo meeting to make "policy support mildly more urgent," but pegged the baseline as a "gradual policy ramp-up rather than a one-off stimulus push," citing resilient exports and Beijing's focus on curbing excess factory capacity.
- Xing cited China's role as a key hardware supplier in the AI-driven investment cycle and a broader Asian industrial capex super-cycle as buffers keeping growth resilient even as domestic demand lags.
Why it matters: With the Politburo meeting approaching in late July, Beijing's policy calibration matters: Morgan Stanley's Xing expects "mildly more urgent" fiscal support but no large stimulus, leaving the AI-chip-driven earnings story exposed if oil-driven price gains continue to fade while domestic demand stays weak — a fragile foundation for double-digit profit growth.
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