Official figures released on Monday revealed that industrial profits in China increased by 4.2% in August compared to the same month last year. This marked the fourth consecutive month of slowing cumulative profit growth for the year.
After peaking at a cumulative growth rate of 24.7% through April, the pace has cooled to 15.7% through August. In contrast, economies benefiting from the artificial intelligence surge are expanding at a much faster rate.
The AI Boom China Missed
In South Korea, audited companies reported a record operating margin of 16.9% in the second quarter, marking an increase of nearly 12 percentage points year-on-year.
Propelled by memory chip manufacturers capitalizing on the artificial intelligence wave, South Korean manufacturing margins alone surged nearly fivefold to reach 24.0%.
Japan experienced a comparable trend, with second-quarter corporate profits jumping 24.6% from the previous year to comfortably exceed forecasts.
Meanwhile, American manufacturers watched their after-tax profits rise to $370.1 billion in the second quarter, up from $225.8 billion during the same period last year.
Compared to these figures, China’s 4.2% expansion represents minimal growth.
Europe Is the Exception
Even so, another major economic region is facing greater difficulties than Beijing. Eurozone industrial production dropped 1.2% year-on-year in January and remained flat by July.
Driven by a recovery in Germany, the Eurozone manufacturing indicator reached a 44-month high in February, while Germany’s domestic index re-entered expansion territory for the first time in over three years.
While Chinese factories experience a slowdown, European manufacturers are virtually stagnant.
What It Means
This divergence highlights an expanding divide within the global market. While artificial intelligence hardware generates substantial profits in Seoul, Tokyo, and Washington, Beijing is left behind, and Brussels falls even further back.
Frequently Asked Questions
How much did China’s industrial profits grow in August?
China’s industrial profits grew by 4.2% in August compared to the same period a year earlier.
How has China’s cumulative profit growth changed this year?
Cumulative profit growth peaked at 24.7% through April and has since slowed for four straight months, easing to 15.7% through August.
How did South Korean manufacturers perform in the second quarter?
South Korean manufacturing margins surged nearly fivefold to reach 24.0%, driven by memory chipmakers capitalizing on the AI wave.
What were the second-quarter after-tax profits for US manufacturers?
US manufacturers reported after-tax profits of $370.1 billion in the second quarter, up from $225.8 billion a year earlier.
How did Eurozone industrial production fare?
Eurozone industrial production fell 1.2% year-on-year in January and was flat by July.
