Employees work on photovoltaic cell modules, used in solar panels, at a factory which duces the modules for export to the US and Europe, in Lianyungang, in China's eastern Jiangsu vince on September 26, 2025.
Afp | Getty ImagesChina's industrial fits soared in August as Beijing pressed ahead with efforts to rein in excess supply and curtail cut-throat price wars, with analysts saying that rationalizing duction will spill into the country's next five-year plan.Industrial fits rose 20.4% in August from a year earlier, reversing three months of consecutive declines, according to data released by the National Bureau of Statistics on Saturday.That sharp rebound also marked the biggest jump since November 2023, when fits surged 29.5% year on year as a slew of -growth measures helped buttress a post-pandemic recovery and bolster the manufacturing sector.Chinese authorities attributed the strong rebound in corporate fitability to macroeconomic policies coupled with the impact from last August's low base — when fitability had declined by double digits — mpting Beijing to unleash a slew of stimulus measures at the end of September last year.Beijing's efforts aimed at curtailing fierce price competition across industrial sectors, at a time when deflation in ducer prices is in its third year, helped ease price declines in August to their slowest in four months.
"The recovery of PPI thanks to China's anti-involution push showed that it has led to the marginal imvement of the fit," said Tommy Xie, head of Asia macro re at OCBC Bank.The easing declines in ducer prices came as industrial output growth in the country slowed to 5.2% in August, its weakest expansion rate in a year.Yet a solid recovery in aggregate demand still appears out of reach as the economy grapples with a longed housing downturn and soft labor market, economists said, reinforcing calls for more forceful policies to boost consumption.A slate of economic data out of China in recent weeks has painted a gloomy picture of the world's second-largest economy, with retail sales growth slowing for a third straight month and the consumer price index once again dipping into the negative territory, underscoring sluggish domestic demand.Uneven recoveryfits recovery in August was uneven across industries.
Demand for raw materials such as steel remained resilient while appetite for goods such as electric vehicles and solar panels remained subdued, economists said.Up industries, such as those involved in the duction of raw materials and nonferrous metals, saw greater fit recovery, benefiting from a "strong commodities cycle" which still has legs to run in the coming months, said Hong Hao, managing partner and CIO at Lotus Asset Management.
Steel duction turned a fit in the first eight months, according to NBS."Rising prices and volumes in the raw material duction sector suggest demand recovery," Hao said, while certain down sectors, such as EVs and solar panels, experienced rising prices but falling demand.Up industries' fits surged by 37.5% from a year earlier in August, versus a decline of 13.5% in July, according to estimates by Goldman Sachs, as demand and prices rose while costs fell.
fits in down industries climbed 15.8% last month, Goldman estimates."The notable imvement of fitability in raw material sectors, such as steel, hints at the government's 'anti-involution' policies at work," said economists at the Wall Street bank.watch now3:3003:30Goldman Sachs: China leaning on exports to counter deflationSquawk Box AsiaAmong industrial firms, state-owned enterprises fared better with a 50% fit jump year on year, compared with 13.2% fit increase for private firms, underscoring how state firms in up industries have responded "more forcefully" to government policies, OCBC's Xie noted.fits in automaking, chemical ducts manufacturing and textile industries decreased 0.3%, 5.5% and 7% respectively, according to the NBS data."Without stronger aggregate demand, the up gains could come at the expense of mid- and down sectors," Xie added, expecting Beijing to unveil additional fiscal support, totaled 500 billion to 1 trillion yuan, aimed at funding certain strategic industries.Supply-demand rebalancingChinese policymakers have doubled down on their "anti-involution" campaign in recent months, seeking to balance excess supply with weak demand while pressing companies to avoid steep discounting that has eroded fits.Industrial firms' fit margins have been under added pressure this year as higher U.S.
tariffs have weighed on China's exports momentum and disrupted global trade flows.
By mid-2025, the aggregate fit margin of China's industrial enterprises had fallen to levels not seen since the early 2000s, Economist Intelligence Unit said in a report earlier this month.watch now6:1006:10China's anti-involution campaign could slow investments, growth: BarclaysSquawk Box AsiaA "restructuring of China's overcapacity sectors is already in motion," EUI economists said.The consolidation cess will ly become a "lasting theme" for China's 15th five-year plan, said Tianchen Xu, senior economist at EUI.
Fixed asset investment saw a sharp slowdown in the January to August period.Chinese authorities will convene a closed-door meeting next month to review plans for economic developments for the next five years.A "successful consolidation" would see the industrial capacity utilization rate back to 75% with the PPI returning to positive territory and industrial fits growing in line with nominal GDP growth, Xu added.China's industrial capacity utilization rate fell to 74% in the second quarter, the lowest level since early 2024.Meanwhile, China has also intensified efforts to boost domestic demand, funding a subsidy gram that encourages consumers to trade in old goods for new ones, while ramping up childcare support and incentivizing es to expand hiring.Beijing is ly to pursue a "gradual" consolidation to limit disruption amid already-weak corporate confidence, the EUI analysts said, rather than "an abrupt and large-scale closure of supply capacity" — even though industrial fits and prices did imve after the recent supply curbs.In a release Monday, China's Ministry of Industry and Information nology slashed its annual output growth target for key non-ferrous metals, including copper and aluminum, over the next year.China is set to release its purchasing managers' index for September on Tuesday, ahead of a week-long Golden Week holiday that runs through Oct.
8.