China's industrial profits rose by 15.1% in June compared to the previous year, marking a deceleration from the significant 21.1% gain recorded in May.
This deceleration follows a period of volatility; industrial corporate earnings in June 2025 fell by 3.6%, with a 2.8% decline recorded for the first half of 2025.
The current manufacturing environment is characterized by several shifting trends, including a rise in factory-gate prices to 3.6% year-on-year in the second quarter—the first positive reading since late 2022.
Conversely, producer prices fell by 0.3% month-on-month in June, marking the first decline since July 2025.
AI-Driven Growth and Market Dynamics
Industrial corporate earnings transitioned from nearly stagnant growth in 2025 to double-digit gains, propelled by an AI-fueled boom in chip and equipment manufacturing alongside the end of a three-year period of factory-gate deflation.
Despite the growth in specific sectors, expectations for a large stimulus package remain low because of resilient exports and Beijing’s focus on curbing excess factory capacity.
The Politburo is expected to make policy support mildly more urgent by prioritizing faster fiscal rollout, with economists anticipating stronger easing language following the second-quarter slowdown.
As the Communist Party's Politburo meeting approaches in late July, officials will review first-half performance to define the policy direction for the remainder of the year.
Industrial profit growth continues to moderate amidst a patchy economic recovery.