China industrial profit growth slows amid AI boom and weak demand

China’s industrial sector is experiencing uneven growth as AI-linked manufacturing outpaces traditional industries struggling with weak domestic demand. Data from the National Bureau of Statistics shows industrial profit growth slowed to 11.2 per cent in July, down from 15.1 per cent in June. High-growth sectors include computer, communication, and electronic equipment manufacturing, which saw a 110 per cent jump in profits, alongside significant surges in fibre optics and communication system equipment.

Conversely, consumer-facing and property-related sectors continue to face significant pressure. Kweichow Moutai, a major liquor producer, reported a 2 per cent decline in first-half net profit due to cautious spending and the property market slump. Reports indicate broader economic stress, with declining retail sales in categories such as automobiles, home appliances, and building materials.

Economic advisers have warned that the mismatch between strong supply and collapsing demand is creating a deflationary loop that could erode long-term growth and innovation. While the vice-finance minister has pledged additional fiscal support, the economy remains pressured by low consumer confidence and external geopolitical uncertainties.