China industrial profit growth slows again in June as retreating oil prices sap earnings lift
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- China's industrial profits rose 15.1% year-on-year in June, slowing for a second straight month from May's 21.1% gain, per National Bureau of Statistics data released Monday.
- First-half profits climbed 18.7%, barely slower than the 18.8% pace in January-May, with the rebound fueled by an AI-driven boom in chip and equipment manufacturing that coincided with the end of nearly three years of factory-gate deflation.
- Factory-gate prices rose 3.6% YoY in Q2 — the first positive reading since late 2022 — but producer prices dipped 0.3% month-on-month in June, the first monthly decline since July 2025, as normalizing Strait of Hormuz tanker flows pulled oil and petrochemical prices lower.
- Economists say much of the price recovery was energy-driven while domestic demand lags, and a favorable comparison with last year (June 2025 earnings fell 3.6%) is also flattering the rebound.
- Morgan Stanley's Robin Xing expects the late-July Politburo meeting to deliver a 'gradual policy ramp-up rather than a one-off stimulus push,' with growth staying resilient thanks to exports and China's role as a key AI hardware supplier.
- Beijing is unlikely to deploy a large stimulus package, analysts say, given resilient exports and its focus on curbing excess factory capacity.
Why it matters: The 18.7% H1 profit rebound looks impressive but rests on two temporary props — surging energy prices that have already reversed and a soft 2025 base — rather than firm domestic demand, leaving the late-July Politburo to decide whether to lean harder on fiscal support or stay restrained.
