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China’s industrial sector saw a notable rebound in August, with profits rising 20.4% year-on-year, reversing a 1.5% decline recorded in July, according to data from the National Bureau of Statistics (NBS). This turnaround marked the strongest monthly growth in nearly a year. For the first eight months of 2024, overall industrial profits grew 0.9%, compared to a 1.7% drop in the January–July period. Despite the improvement, concerns over weak domestic demand and broader economic headwinds continue to weigh on the outlook.
The profit recovery comes as Beijing intensified efforts to curb excessive price competition, particularly in high-profile industries like automobiles and solar energy, where aggressive discounting had eroded margins. Electric vehicle giant BYD, for instance, reported its first quarterly profit decline in three-and-a-half years, highlighting the impact of relentless price wars across the sector. Policymakers’ crackdown on such practices has eased producer deflation, with factory-gate prices showing smaller declines in recent months.
Still, structural challenges persist. China’s housing downturn, sluggish labor market, and weak consumer sentiment have limited demand recovery. In August, both factory output and retail sales grew at their slowest pace since last year, signaling that businesses remain cautious despite short-term profitability gains.
State-owned enterprises underperformed, with profits falling 1.7% in the January–August period, while private firms posted a 3.3% increase. Foreign companies also registered modest growth, with profits up 0.9%. Analysts suggest that while selective policy support is helping stabilize margins, the absence of large-scale stimulus reflects Beijing’s caution about stoking financial risks or overheating equity markets.
Global monetary policy shifts could provide some relief. If the U.S. Federal Reserve continues rate cuts, the People’s Bank of China may gain flexibility to ease its own policies without triggering capital flight or sharp yuan depreciation.
Industrial profit figures track companies with annual revenues above 20 million yuan ($2.81 million). As China seeks to balance growth with financial stability, August’s rebound offers cautious optimism but underscores the fragility of its recovery.
