China’s Industrial Profit Decline Slows for Second Month Amid Policy Boost

China’s industrial profits are gradually rebounding from earlier trade tensions with the U.S., as government measures aimed at stabilizing economic growth start to take effect. In July, the decline in profits narrowed for the second consecutive month, according to official data.

Profits at large-scale Chinese industrial firms—those with annual revenues exceeding CNY 20 million (around USD 2.8 million)—fell by 1.5 percent compared to the previous year, based on data released by the National Bureau of Statistics. This represents a 2.8 percentage point improvement from the 4.3 percent decrease in June and a significant recovery from May’s 9.1 percent drop amid ongoing trade disputes with the U.S.

In the first seven months of the year, industrial profits decreased by 1.7 percent year-on-year to CNY 4 trillion (approximately USD 559 billion), while revenues increased by 2.3 percent to CNY 78.1 trillion (around USD 10.9 trillion), the statistics agency reported.

Several policies introduced in July to stabilize prices have contributed to the recovery in profitability, according to Yu Weining, an official at the National Bureau of Statistics. The manufacturing sector’s larger firms led the fightback, with profits rising by 6.8 percent year-on-year—an expansion of 5.4 percentage points from June.

The effort to bolster China’s semiconductor industry provided a significant boost. Profits at integrated circuit manufacturers surged by 176 percent in July compared to the previous year, while semiconductor equipment companies more than doubled their profits.

Supported by government initiatives promoting large-scale equipment upgrades and trade-ins for consumer electronics, other high-tech sectors also experienced strong growth. Computer manufacturers saw profits more than double, skyrocketing by 124 percent; drone manufacturers doubled their earnings; and electronic and electrical machinery producers reported an 88 percent increase.

Smaller and medium-sized enterprises, along with private firms, also saw profit growth. Small businesses’ profits rose modestly by 0.5 percent in July, a considerable improvement from June’s 9.7 percent decline. Medium-sized firms turned around from a 7.8 percent drop in June to a 1.8 percent gain last month. Private companies experienced a 2.6 percent increase in profits over the same period.

Nevertheless, low prices for industrial products continue to limit profit margins, despite gains from equipment renewals and consumer goods trade-ins. Analysts believe that increasing demand is crucial to further easing this challenge. Going forward, the scope and timing of fiscal policies will be vital in supporting profitability.