China posts weakest industrial profit growth this year, expanding 4.2% in August

Beijing, September 28 - China's industrial profit growth decelerated significantly in August, as the robust performance of technology manufacturing due to the AI boom was outpaced by steadily weak domestic demand, according to Reuters. Firms are finding it challenging to sustain pricing power owing to subdued consumption and surplus production capacity in certain sectors.

Factories are now relying on overseas markets to generate higher profits, a trend that may exacerbate China's dependence on exports amid escalating geopolitical tensions and heightened scrutiny of its trade surplus. Industrial profits in China surged 4.2% in August compared to the previous year, down from 11.2% in July, while the overall profit growth increased 15.7% in the first eight months, easing from 17.6% in the January-July period, as revealed by National Bureau of Statistics data on Monday.

Profit growth in the computer, communication, and other electronic equipment manufacturing sector was the most significant, jumping 110% in the first eight months, as per the National Bureau of Statistics breakdown. However, the wine, beverages, and refined tea manufacturing industry emerged as the poorest performer, witnessing a decline of 34.7% in profits.

Earlier this month, a central bank adviser cautioned that artificial intelligence could worsen and prolong China's imbalance between abundant supply and sluggish demand, prompting calls for interventions to spur consumer spending and bolster balance sheets across the economy. Industrial profit data encompasses companies with annual revenue exceeding 20 million yuan ($2.98 million) from their core operations.