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

China's industrial profits grew 4.2% in August from a year earlier, official data released Monday showed, as manufacturers grapple with persistent weakness in consumer demand and a sustained rise in energy costs.

For the first eight months of this year, profits at large industrial firms climbed 15.7%, easing from a 17.6% rise in the January-July period . That would mark the fourth straight month of deceleration from the 24.7% pace set in April .

While growth has been slowing, industrial earnings have staged a notable reversal this year, swinging from a barely-positive 0.6% gain for all of 2025 — the first increase after three straight years of declines — to double-digit growth. That expansion has been led by the artificial-intelligence-fueled boom in chips and computing equipment and has coincided with the end of nearly three years of factory-gate deflation.

Profits at the computer, communication and electronic equipment manufacturing industry more than doubled for the January-to-August period, rising 110% from a year earlier. The automobile manufacturing industry, however, saw profits drop by 16% during the same period as the sector sees cut-throat competition.

Dragged by tepid consumer demand, growth in the world's second-largest economy softened to its slowest pace in more than three years in the second quarter.

The official purchasing managers' index indicated that manufacturing activity contracted for two consecutive months in July and August. Retail sales slowed further , and the urban investment slump deepened in August, while industrial output rebounded on the back of exports.

Economists expect Beijing to lean harder on stimulus to stabilize corporate profitability, as consolidation accelerates in sectors already facing sluggish demand, fierce competition and cutthroat price wars.