Official figures released on Monday revealed that China’s industrial profits increased by 4.2% in August compared to the previous year. At the same time, the year’s cumulative profit growth experienced a slowdown for the fourth consecutive month.
Through April, that cumulative rate reached a peak of 24.7% before moderating to 15.7% through the end of August. In contrast, an artificial intelligence-driven earnings surge is accelerating growth in competing nations at a much faster rate.
The AI Boom China Missed
During the second quarter, audited businesses in South Korea achieved a record operating margin of 16.9%, representing an increase of nearly 12 percentage points year-on-year.
Driven by semiconductor manufacturers capitalizing on the AI memory wave, manufacturing margins alone surged by almost five times to reach 24.0%.
Japan reported comparable trends, with corporate profits surging 24.6% year-on-year during the second quarter to easily surpass projections.
In the United States, manufacturers registered after-tax profits of $370.1 billion for the second quarter, rising from $225.8 billion during the same period a year prior.
Conversely, China’s 4.2% expansion amounts to minimal growth.
Europe Is the Exception
Nevertheless, a major economic bloc is facing even greater difficulties than Beijing. Eurozone industrial production dropped 1.2% year-on-year in January and remained stagnant by July.
Spearheaded by a recovery in Germany, the Eurozone manufacturing indicator reached a 44-month peak in February, while Germany’s domestic index moved back into expansion territory for the first time in over three years.
While Chinese factories experience a deceleration, European production is essentially stagnant.
What It Means
This divergence highlights an expanding divide within the worldwide economy. Seoul, Tokyo, and Washington are generating substantial profits from AI hardware.
Beijing remains positioned between these economies, while Brussels trails further behind.