China's industrial profit growth moderates as exports cushion uneven recovery

BEIJING, July 27 (Reuters) - Profits at ‌China's industrial firms ​grew ​at a solid, though slower, pace as resilient exports helped cushion sluggish domestic demand, highlighting the economy's uneven recovery despite policymakers' efforts to spur ‌consumption.

Exports and industrial production have done much of the heavy lifting ⁠for the world's second-largest economy. Persistent weakness in consumption and the property sector, however, helped drag second-quarter ‌growth to its slowest pace ‌in more than three years, keeping calls alive for further policy support to address economic imbalances.

Industrial profit growth eased to 15.1% in June from 21.1% in May, ​while first-half profits rose 18.7% from a year earlier, compared with an 18.8% increase in the January-to-May period, data from the National Bureau of Statistics (NBS) showed on ⁠Monday.

"If this recovery can be sustained, it will be a good sign for the rest of the economy, ​as a return of profits growth could give companies room to resume wage growth," said Lynn Song, chief economist of Greater China at ​ING.

The figures add to evidence of a two-speed ‌recovery in the world's second-largest economy, where manufacturers have benefited from robust overseas demand, while sectors tied to domestic spending continue ⁠to struggle.

"The external environment remains complex and international commodity prices uncertain," NBS statistician Yu Weining said. "Industrial firms also face weak demand and cash flow pressures."

Underlining strains in the domestic market, automobile manufacturing ⁠profits fell 19.5% in the first half of the year, NBS data showed, as car sales ​declined for a ninth consecutive month in June.

Market reaction was muted with Chinese stocks and the yuan slightly firmer following the data.

Attention is now turning to the Communist Party's Politburo meeting at ‌the end of July, a key policy-setting gathering where investors will look for signals on additional support measures.

Expectations for a broad-based ‌stimulus package have been tempered, however, by resilient exports and Beijing's preference for targeted easing.

Industrial profit ⁠figures cover firms with annual ‌revenue of at least 20 ​million yuan ($2.95 million) from their main operations.

($1 = 6.7728 Chinese yuan)

(Reporting by Qiaoyi Li, Tian Qiao and Ryan Woo; Editing by Thomas Derpinghaus and ‌Jacqueline Wong)

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