At FinancialMediaGuide, we note that August marked a turning point for China’s industrial sector: profits surged 20.4% year-on-year, lifting results for January–August into positive territory at +0.9%, compared with a 1.7% decline in the first seven months. This rebound looks impressive against the backdrop of widespread expectations of an economic slowdown, yet the fundamental problems have not gone away.
The key driver was government intervention aimed at curbing price wars in industries such as automotive and solar energy. This helped slow producer deflation and temporarily stabilize margins. However, weak demand remains the sector’s Achilles’ heel. We emphasize that without a genuine recovery in consumer activity, profit growth may prove to be little more than a short-term effect.
A telling signal came from the electric vehicle leader BYD, which reported its first quarterly profit decline in three and a half years. At the same time, the housing crisis and a sluggish labor market continue to weigh on domestic consumption. August figures for both industrial output and retail sales posted their weakest growth since last year, confirming that a real recovery has yet to begin.
In our view, Beijing’s cautious stance on stimulus reflects a strategic dilemma: policymakers are balancing between supporting the economy and avoiding risks of overheating the stock market or pressuring the yuan. Meanwhile, potential rate cuts by the U.S. Federal Reserve could give the People’s Bank of China more room to maneuver without sparking significant capital outflows.
There is also a notable structural shift: according to NBS data, profits of state-owned firms fell 1.7% in January–August, while private-sector firms grew 3.3% and foreign companies posted a 0.9% gain. At Financial Media Guide, we see this as further proof that flexibility and adaptability are the key advantages for companies navigating instability.
Our forecast: in the coming months, market attention will focus on demand-side data and the trajectory of the property market. If domestic consumption continues to weaken, profit growth in industry will remain a statistical artifact rather than a signal of sustainable recovery. We caution investors that China is entering a period where headline numbers and on-the-ground reality may diverge more sharply than ever.
