Q2 2026: Weakest Utilization Since 2020
China's national industrial capacity utilization fell to 73.0 percent in the second quarter of 2026, down 0.6 percentage points from Q1 and 1.0 percentage point from a year earlier, according to National Bureau of Statistics data. The reading marks the lowest point since the post-pandemic recovery of 2020, raising concerns about persistent industrial overcapacity.
Capacity Utilization by Sector
| Sector | Capacity Utilization (Q2 2026) |
|---|---|
| Overall industrial average | 73.0% |
| Manufacturing (sub-index) | 73.0% |
| Mining (sub-index) | 73.0% |
| Utilities (sub-index) | 73.1% |
| Automotive manufacturing | 64.0% (estimated) |
Key Drivers of the Decline
- Property sector slump: Weak property sales and construction activity continue to suppress demand for steel, cement, glass, and aluminium.
- EV sector overcapacity: Rapid expansion of electric vehicle production capacity has outpaced demand growth, dragging down equipment utilization across the supply chain.
- External tariff pressure: US tariffs on Chinese goods and retaliatory measures are constraining export growth in manufacturing-intensive sectors.
Policy Responses and Outlook
At the 73.0-percent level, utilization remains below the 76–78 percent equilibrium range typically associated with balanced supply and demand. Low utilization pressures corporate profits, discourages new investment, and can eventually lead to layoffs.
Authorities have several levers available: demand-side stimulus through infrastructure spending, supply-side consolidation in targeted industries, and accelerated overseas capacity transfers under the Belt and Road Initiative. H2 2026 policy direction from the Politburo indicates that demand-side measures will take priority, which could support a gradual recovery in capacity utilization toward the 75-percent range by year-end if implemented swiftly.
Source: National Bureau of Statistics of China, July 15, 2026; Trading Economics.