11.2% TO 4.2%: China’s Industrial Profit Slowdown

AI-linked tech manufacturing is booming in China, but weak consumption is dragging on overall industrial profit growth

September 28, 2026

AI-linked electronics profits up 110%, beverage profits down 34.7% — China's uneven economy

Growth slows from 11.2% in July as excess capacity and soft consumption erode pricing power

Profit growth at China’s industrial firms slowed sharply in August, as soft domestic demand and excess capacity weighed on companies, with gains in AI-linked technology manufacturing unable to offset broader economic imbalances, according to a Reuters report.

Profits at China’s industrial firms rose 4.2 per cent year-on-year in August, down from an 11.2 per cent increase in July, according to data from the National Bureau of Statistics cited by Reuters. Over the first eight months of the year, industrial profits grew 15.7 per cent, easing from the 17.6 per cent growth recorded in the January-July period.

Pricing power under pressure

The slowdown reflects the difficulty companies face in maintaining pricing power amid subdued consumption and overcapacity in some sectors. Manufacturers are increasingly turning to overseas markets to secure better profits, a shift that could deepen China’s reliance on exports at a time of heightened geopolitical tensions and greater scrutiny of its trade surplus.

A tale of two sectors

Technology manufacturing remained a key driver of profit growth. Profits in computer, communication and other electronic equipment manufacturing jumped 110 per cent in the first eight months of the year. By contrast, profits in the wine, beverages and refined tea manufacturing industry fell 34.7 per cent over the same period, highlighting the strain on sectors more exposed to weak domestic consumption.

AI boom raises imbalance concerns

The report also flagged concerns that the rapid expansion of AI-related industries could add to existing economic imbalances. Earlier this month, a central bank adviser warned that AI could worsen and prolong the gap between strong supply and subdued demand, according to Reuters. The warning adds to calls for measures to boost consumer spending and strengthen balance sheets across the economy.

The industrial profit data covers firms with annual revenue of at least 20 million yuan (about USD 2.98 million) from their main operations.

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