SHENZHEN, CHINA – AUGUST 30: The Chinese flag flies from the ship in front of the MSC Claire container ship moored under a gantry crane at Yantian Port in Shenzhen, Guangdong Province, China on August 30, 2026. China is set to release its latest official manufacturing Purchasing Managers Index as investors assess the outlook for factory activity, domestic demand and exports as pressure continues on the world’s second-largest economy. (Photo by Chen Xin/Getty Images)
Chen Xin | Getty Images News | Getty Images
China’s industrial profits rose 4.2% in August from a year earlier, as manufacturers grappled with persistent weakness in consumer demand and persistently rising energy costs, official data released on Monday showed.
Profits at large industrial companies rose 15.7% in the first eight months of this year, slowing from a 17.6% rise in the first eight months of the year. This would be the fourth consecutive month of deceleration from the 24.7% pace set in April.
While growth has slowed, industrial profits have undergone a remarkable reversal this year, going from barely positive 0.6% growth for the full year of 2025 (the first increase after three consecutive years of decline) to double-digit growth. The expansion is being driven by a boom in chips and computing equipment powered by artificial intelligence and coincides with the end of nearly three years of factory-gate deflation.
Profits in the computer, communications and electronics manufacturing industry more than doubled from January to August, increasing 110% year-on-year. However, the auto manufacturing industry faced intense competition, with profits dropping 16% over the same period.
Growth in the world’s second-largest economy slowed to its slowest pace in more than three years in the second quarter, dragged down by weak consumer demand.
The official Purchasing Managers’ Index showed manufacturing activity contracted for the second consecutive month in July and August. While retail sales slowed further and the slump in urban investment worsened in August, industrial production recovered on the back of exports.
Economists expect the Chinese government to step up its stimulus efforts to stabilize corporate profitability as consolidation accelerates in a sector already facing weak demand, fierce competition and fierce price wars.
