High-tech manufacturing spurs China's July industrial profit growth

By Qiaoyi Li and Ryan Woo

BEIJING (Reuters) - China's industrial profits grew faster in July buoyed by high-tech manufacturing, even as sluggish domestic demand weighed on the recovery in the world's second-largest economy.

Profits in July jumped 4.1% from a year earlier following a 3.6% rise in June, National Bureau of Statistics (NBS) data showed on Tuesday.

For the January-July period, profits expanded slightly faster at 3.6% compared with 3.5% in the first half, offering some hope of improving momentum amid dreary factory output, export, prices and banking lending numbers earlier in August.

"The mild expansion in industrial profits showed that domestic macro policies are taking effect" as the factory sector is undergoing a transition and upgrade, said Zhou Maohua, a macroeconomic researcher at China Everbright Bank.

The high-tech manufacturing sector, including the making of lithium-ion batteries and semiconductors and related equipment, led the earnings growth with a 12.8% rise in the January-July period, the data showed.

Still, "domestic consumption demand remains weak while the external environment is complex and volatile," said NBS statistician Wei Ning, suggesting more efforts were needed to boost domestic demand.

Tamer shipments last month raised a red flag over the country's export-driven recovery and heightened concerns about frail domestic demand.

China's July bank loans recorded the first contraction in 19 years, central bank data showed earlier.

Electric vehicle battery giant CATL recorded faster profit growth in the second quarter, but its revenue fell at a faster clip during the quarter, as EV sales slow in the world's largest auto market.

Amid lacklustre demand, a prolonged housing downturn and employment worries, Beijing is looking to pivot its stimulus toward consumption.

At a cabinet plenary session earlier this month, Premier Li Qiang vowed to boost the economy with a focus on consumption.

State-owned firms booked a 1% rise in profits in the first seven months, foreign firms posted a 9.9% gain, while private-sector companies saw profits up 7.3%, NBS data showed.

Industrial profit numbers cover firms with annual revenue of at least 20 million yuan ($2.80 million) from their main operations.

($1 = 7.1395 Chinese yuan)

(Reporting by Qiaoyi Li and Ryan Woo; Editing by Jacqueline Wong)