China’s industrial sector remains under pressure, as total profits among large-scale industrial enterprises slid 1.7% year-over-year in the January–July period, totaling CNY 4.02 trillion, according to the National Bureau of Statistics (NBS). This marks a modest improvement from the 1.8% contraction recorded in the first half of the year.
The mining sector endured a sharp downturn, with profits dropping by a staggering 31.6%, but manufacturing firms delivered a 4.8% rise in profits, marking a rare bright spot amid broader industrial malaise. Utilities also contributed positively, with profits up 3.9%.
State-controlled enterprises saw a sizable 7.5% decline, while private and foreign-invested firms both posted 1.8% gains, underscoring persistent challenges in the state sector and relatively stronger performance in more dynamic segments.
Within manufacturing, food processing led growth at up 14.5?%, followed by electrical machinery (up 11.7%), nonferrous metals (up 6.9%), computer & electronics (up 6.7%), general equipment (up 6.4%), and power supply (up 6.3%). Automobile manufacturing eked out only up 0.9% growth, while several sectors reported declines, including chemicals (down 8.0%), textiles (down 6.5%), non?metallic mineral products (down 5.6%), oil & gas extraction (down 12.6%), and especially coal mining & washing, which plummeted 55.2%.
Revenue among large-scale industrial firms rose 2.3?%, but costs climbed faster at 2.5?%, dragging the operating profit margin down by 0.21 percentage points. As of the end of July, assets grew 4.9%, liabilities 5.1%, and equity 4.6%, pushing the debt?to?asset ratio up slightly to 57.9%.
Inventories and receivables expanded, with average receivable collection days lengthening to 69.8, signaling increasing working?capital strain. On a monthly basis, July industrial profits slipped 1.5%, the third consecutive monthly decline
The sharp decline across mining and fossil fuel extraction sectors reflects both structural and demand headwinds. Simultaneously, the manufacturing rebound—especially in high?tech and electrical equipment—mirrors China’s ongoing pivot toward advanced industries and the energy transition.
While upstream oil and gas extraction suffered double?digit profit declines, downstream activity such as fuel processing reported smaller losses. This divergence suggests that refining and petrochemical demand is holding up better than upstream commodity extraction.
In July, China’s fuel oil imports surged to a seven?month high—up 40% month-on-month and 42% year-on-year—spurred by favorable crack spreads and tax rebate incentives for independent refiners. Simultaneously, refinery runs climbed to 14.85 million barrels per day, an 8.9% year-on-year increase, suggesting strengthening oil demand.
Major analysts, including the IEA, forecast a near?term peak or plateau in Chinese oil demand. The IEA projects flattening demand growth through 2025, with most future oil consumption growth driven by petrochemical needs—not road fuels—and peaking by decade’s end. CNPC anticipates only a 1.1% increase in total oil demand in 2025, with petrochemicals as the engine. Chinese oil giants PetroChina and Sinopec expect the country’s oil consumption to peak in 2025 and 2027, respectively.
By Charles Kennedy for Oilprice.com
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