July industrial profits in China fall as COVID slows down and heat waves hit

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SHANGHAI — Profits at Chinese industrial companies tumbled in July, reversing previous gains as new COVID-19 restrictions lowered demand and squeezed factory margins, while power shortages from waves of heat threatened production.

Profits at China’s industrial enterprises fell 1.1% in January-July from a year earlier, erasing the 1.0% growth recorded in the first six months, the National Bureau of Statistics said on Saturday.

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The bureau did not report standalone numbers for July.

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Factory production and operations in major manufacturing hubs like Shenzhen and Tianjin were hit during the month as new COVID restrictions were imposed.

In July, China’s industrial production growth slowed to 3.8% year-on-year from 3.9% in June.

Searing heat waves have swept across China’s vast Yangtze River basin since mid-July, pounding densely populated cities from Shanghai to Chengdu.

Industrial company liabilities jumped 10.5% from a year earlier in July, matching June’s 10.5% increase, the statistics office said.

China’s economy narrowly escaped contraction in the three months to June as tight COVID control restrictions and a struggling real estate sector weighed on demand.

Policymakers are scrambling to prop up the faltering economy by doubling infrastructure spending.

The industrial profit data covers large companies with annual revenues of more than 20 million yuan ($3 million) from their core businesses. ($1 = 6.8715 Chinese yuan renminbi)

(Reporting by Josh Horwitz and Gao Liangping; Editing by William Mallard)