China’s industrial profits expanded just 4.2% in August from a year earlier, marking the weakest pace of growth recorded so far in 2026, according to official data released Monday.
The August figure represented the fourth consecutive month of deceleration, following a 24.7% expansion in April, and the poorest performance since November 2025 when profits posted a double-digit decline.
For the first eight months of this year, profits at large industrial firms climbed 15.7%, losing momentum from a 17.6% rise recorded during the January-to-July period.
The slowdown follows a notable reversal earlier in the year, when industrial earnings swung from a barely-positive 0.6% gain for all of 2025 to sustained double-digit growth driven by artificial intelligence, chips, and computing equipment.
That earlier expansion had also coincided with the end of nearly three years of factory-gate deflation, providing some relief to manufacturers who had endured prolonged pressure on margins.
The latest data reveals an increasingly bifurcated economy, with high-tech sectors including AI and robotics posting strong earnings while consumer-related industries such as clothing, autos, and furniture showed declining profits.
Profits in the computer, communication, and electronic equipment manufacturing industry more than doubled for the January-to-August period, rising 110% from a year earlier, underscoring the strength of technology-driven demand.
By contrast, the automobile manufacturing industry saw profits drop 16% during the same period, as the sector continues to face cut-throat competition across domestic and international markets.
Yu Weining, chief statistician at NBS, attributed the August deceleration to a high base effect from last year, when profits reversed months of declines to surge 20.4% year on year amid Beijing’s efforts to curb price wars in several industrial sectors.
In the statement released Monday, Yu repeated policymakers’ pledges to bolster domestic demand and “optimize” supplies, signalling continued government attention to the profitability pressures facing manufacturers.
Growth in the world’s second-largest economy softened to its slowest in more than three years in the second quarter, as a multiyear property downturn continued to depress consumer demand and investment.
The official purchasing managers’ index indicated that manufacturing activity contracted for two consecutive months in July and August, adding to concerns about the durability of China’s economic recovery.
Retail sales slowed further and the urban investment slump deepened in August, even as industrial output rebounded on the back of stronger export performance.
Allan von Mehren, China economist at Danske Bank, said authorities will likely step up policy implementation in the second half of this year to shore up the economy, accelerating deployment of investment in strategic sectors such as water, power grid, data centers, networks, urban pipelines, and logistics networks.
Economists broadly expect Beijing to lean harder on stimulus to stabilise corporate profitability as consolidation accelerates in sectors already facing sluggish demand, fierce competition, and cutthroat price wars.