China's industrial profits rebounded sharply in August. Here's what powered that growth

Published: Monday, September 29, 2025 at 9:45 am

China's Industrial Profits Surge, Signaling Economic Shifts

Beijing, China - China's industrial sector experienced a significant rebound in August, according to recent reports. This growth is attributed to a multifaceted approach by Chinese authorities, including efforts to restructure key industrial sectors and stimulate domestic demand.

Economists at the Economic University Institute (EUI) note that a restructuring of overcapacity sectors is underway, a process expected to become a "lasting theme" in China's upcoming five-year plan. This consolidation aims to bring the industrial capacity utilization rate back to 75%, alongside positive producer price index (PPI) figures and industrial profit growth aligned with nominal GDP growth.

The second quarter saw the industrial capacity utilization rate fall to 74%, the lowest level since early 2024. To address this, the government is implementing measures to boost domestic demand. These include a subsidy program encouraging consumers to trade in old goods for new ones, increased childcare support, and incentives for businesses to expand hiring.

Authorities are expected to pursue a "gradual" consolidation strategy to mitigate potential disruptions, particularly given the already-weak corporate confidence. This approach contrasts with the possibility of abrupt, large-scale closures, even though industrial profits and prices have shown improvement following recent supply curbs.

Further indicating the government's focus on industrial adjustments, the Ministry of Industry and Information Technology announced a reduction in the annual output growth target for key non-ferrous metals, such as copper and aluminum, for the coming year.

The upcoming release of the purchasing managers' index (PMI) for September, scheduled for Tuesday, will provide further insights into the economic trajectory. This release precedes a week-long Golden Week holiday, which concludes on October 8th.

BNN's Perspective: The Chinese government's dual approach of industrial restructuring and demand stimulation suggests a proactive stance in navigating current economic challenges. While the gradual consolidation strategy aims to minimize disruption, its success will depend on effectively balancing supply-side adjustments with sustained consumer confidence and investment. The coming months will be crucial in assessing the effectiveness of these measures and their impact on the broader global economy.

Keywords: China, industrial profits, economic growth, restructuring, overcapacity, capacity utilization, domestic demand, subsidy program, PMI, five-year plan, non-ferrous metals, economic outlook

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