SHANGHAI - Profits at China's industrial firms sank in July, reversing previous gains as fresh COVID-19 curbs dragged down demand and squeezed factory margins, while power shortages due to heatwaves threatened production.

Profits at China's industrial firms fell 1.1% in January-July from a year earlier, wiping out the 1.0% growth logged during the first six months, the National Bureau of Statistics said on Saturday.

The bureau did not report standalone figures for July.

Factory production and activities in major manufacturing hubs like Shenzhen and Tianjin were hit in the month as fresh COVID curbs were imposed.

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

Searing heatwaves have swept across China's vast Yangtze River basin since mid-July, hammering densely populated cities from Shanghai to Chengdu.

Liabilities at industrial firms jumped 10.5% from a year earlier in July, matching the 10.5% increase in June, the statistics bureau said.

China's economy narrowly escaped contraction in the three months to June, as strict COVID control restrictions and a distressed property sector pummelled demand.

Policymakers are striving to prop up the flagging economy by doubling down on infrastructure spending.

The industrial profit data covers large firms with annual revenues of over 20 million yuan ($3 million) from their main operations. ($1 = 6.8715 Chinese yuan renminbi)

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