BEIJING — China’s industrial sector showed renewed strength in August as the artificial intelligence (AI)-driven tech boom fueled factory output, though sluggish consumption and a worsening investment slump reinforced concerns over deepening economic imbalances.
Tuesday’s data highlighted a familiar fault line in the world’s second-largest economy, where resilient manufacturing and exports are sustaining growth even as weak household spending and a property market downturn weigh on domestic demand. The divergence is likely to intensify pressure on Beijing to roll out more support measures as policymakers seek a more balanced recovery.
Industrial output grew 5.2 percent from a year earlier in August, quickening from a 4.5-percent increase in July and beating expectations for a 4.8-percent rise, figures released by the National Bureau of Statistics showed. Strong expansion in equipment and high-tech manufacturing underpinned the production upturn.
Retail sales, a gauge of consumer activity, rose 0.4 percent, slowing from a 0.6-percent gain in July and below an expected 0.8-percent rise.
Weak consumption and the real estate market crisis dragged second-quarter gross domestic product (GDP) growth to 4.3 percent, the slowest pace in more than three years and below the lower end of China’s 4.5-percent to 5.0-percent annual target.
“Barring an unexpectedly strong September, GDP growth will likely remain sluggish in the third quarter,” said Lynn Song, ING’s Greater China chief economist.
Oxford Economics lowered its 2026 growth forecast by 0.1 percentage point to 4.7 percent and cut next year’s to 4.3 percent, from 4.6 percent, “reflecting a more prolonged property downturn which is likely to keep growth subdued despite stronger public investment,” senior economist Sheana Yue said.
The data barely moved China’s markets, leaving the key stock benchmarks down roughly 0.3 percent while the yuan weakened slightly against the dollar.
Property slump, tech boom
The latest data underscored the scale of the challenge facing policymakers as businesses remain reluctant to commit new capital and the property market continues to sap consumption and restrain growth.
Fixed-asset investment, which includes infrastructure and property investment, declined 7.2 percent in the first eight months, marking the steepest drop since April 2020.
Property investment dived 19.9 percent in the first eight months from the same period last year, and new home prices extended declines from the previous month, signaling a housing market still trapped in a prolonged downturn.
Against that backdrop, strong exports driven by AI infrastructure spending and demand for advanced technology products are providing a critical buffer for growth.
Investment in high-tech industries expanded 5.2 percent in the January-to-August period, in keeping with the global AI boom. Output of lithium-ion batteries and industrial robots, for example, soared 57.2 percent and 34.6 percent year on year, respectively.
Behind the divide is a government push to guide resources to the advanced manufacturing sector to reduce the economy’s reliance on property and bolster technological self-sufficiency, but the surge in high-tech investment has yet to translate into stronger household incomes or greater job security.
The nationwide urban surveyed unemployment rate came in at 5.3 percent for August, edging up from 5.2 percent the previous month.
