China's August Industrial Profit Growth Slows to 4.2% as Domestic Demand Slump Persists Amid AI Boom

[Financial News] China's industrial profit growth slowed last month as weak domestic demand persisted despite the Artificial Intelligence (AI) boom.
On the 28th, the National Bureau of Statistics of China (NBS) announced that the profits (total profits) of industrial enterprises above the designated size—those with annual revenue of at least 20 million yuan—increased 15.7% year on year in January-August. This was 1.9 percentage points lower than the 17.6% increase recorded in January-July.
In August alone, industrial profits rose just 4.2% from a year earlier, down sharply from the 11.2% increase in July.
Weak consumption and excess capacity in some industries are making it difficult for companies to maintain pricing power.
Some analysts have warned that China's reliance on exports could increase further as geopolitical tensions rise and concerns grow over the country's trade surplus. There are also projections that rapidly expanding AI could worsen and prolong the imbalance caused by China's strong supply and weak demand.
The NBS, however, explained that the slowdown in August was partly due to the high base effect from the same month a year earlier, among other factors.
By type of enterprise, state-owned enterprises posted profits of 1.67599 trillion yuan (about 340 trillion won) in January-August, up 10.3% from a year earlier.
Joint-stock companies recorded profits of 4.07146 trillion yuan (about 824 trillion won), up 20.4%, while private enterprises posted 1.32132 trillion yuan (about 268 trillion won), an increase of 10.4%.
Profits at foreign-funded enterprises and enterprises invested in by Hong Kong, Macao and Taiwan totaled 1.17947 trillion yuan (about 239 trillion won), up 2.3%.
By industry, mining profits increased 35.1% in January-August, while manufacturing profits rose 17.4%. In contrast, profits in the electricity, heat, gas, water and supply industries fell 12.0%.


Among industries, the electronics sector stood out for its strong performance, benefiting from AI and other emerging technologies.
Profits in the manufacture of computers, communications equipment and other electronic equipment increased 110% year on year in January-August.
Amid expanding demand for new energy vehicles (NEVs), the Internet of Things (IoT) and computing power centers, profits in optoelectronic component manufacturing and semiconductor component manufacturing rose 72.0% and 51.8%, respectively.
Profits in optical-fiber and optical-cable manufacturing also increased 530% and 100%, respectively, supported by expanded investment in computing infrastructure.
Profits in nonferrous metal smelting and rolling, the manufacture of chemical raw materials and chemical products, and coal mining and washing rose 82.9%, 51.0% and 51.6%, respectively.
In contrast, profits in wine, beverage and refined-tea manufacturing fell 34.7% in January-August, making it one of the weaker-performing industries.
Wei Weining, chief statistician at the Industrial Statistics Department of the NBS, explained, "As applications of new technologies, with AI at the forefront, rapidly expanded, demand in related fields increased and drove rapid profit growth in the electronics sector."

[email protected] Lee Seok-woo, International Affairs Correspondent Reporter