- Capacity utilisation of coal mining, washing sector hits lowest level since 2017
- Equipment manufacturing, electronics industries record higher utilisation
In Q2CY’26, China’s overall industrial capacity utilisation rate declined to 73%, its lowest level since Q2CY’20, primarily weighed down by weakness in coal mining and petrochemical-related industries. This decline occurred despite improving utilisation trends in emerging industries and several sectors targeted under anti-involution initiatives, highlighting a widening divergence between traditional industrial segments and new growth sectors.
Data released by the National Bureau of Statistics (NBS) showed that the capacity utilisation rate of China’s industrial enterprises above designated size was 73% in Q2, down 0.6 percentage points from Q1 and 1 percentage point lower than the same period last year.
This marked the lowest level in six years, exceeding only the 67.3% recorded in Q1 of CY’20 when the COVID-19 outbreak began. It was also close to the 73.1% level seen in the same period of 2016 during the previous round of supply-side structural reforms.
In the first half of CY’26, China’s industrial capacity utilisation rate averaged 73.3%, below the 74.4% recorded for full-year CY’25.
The decline in overall industrial capacity utilisation was mainly driven by weakness in the coal sector and midstream industries across the petrochemical value chain. In Q2CY’26, the capacity utilisation rate of coal mining and washing fell to 61.2%, down 5.2 percentage points from Q1 and reaching its lowest level since 2017.
Amid continued volatility in global energy supply chains, oil and natural gas extraction maintained a relatively high utilisation rate of 91.7%, although this still represented a 0.8 percentage-point decline from the previous quarter. Lower oil prices may have weighed on utilisation in downstream chemical industries, with capacity utilisation in chemical raw materials and chemical products manufacturing and chemical fibre manufacturing declining to 69.4% and 84.2%, respectively, down 4.4 percentage points and 0.5 percentage points from Q1.
In addition, capacity utilisation in ferrous metal smelting and rolling processing and non-ferrous metal smelting and rolling processing stood at 77.6% and 76.2% in Q2, respectively, declining 0.5 percentage points and 1.1 percentage points from the previous quarter.
Capacity utilisation weakened across most bulk commodity industries, driving the mining sector’s overall utilisation rate down to 69.1%, 3 percentage points lower than the previous quarter. The decline in mining was notably sharper than that observed in manufacturing and in the production and supply sectors of electricity, heat, gas, and water.
Some industries facing intense “involution-style” competition experienced declines in capacity utilisation in 2026 after an improvement in 2025. The capacity utilisation rates of the electrical machinery and equipment manufacturing industry, which includes photovoltaic equipment and component manufacturing as well as various battery manufacturing segments, were 71.6% and 70.3% in Q1 and Q2 CY’26, respectively, both below the 75% average recorded for full-year 2025. The pharmaceutical manufacturing industry also saw its capacity utilisation rate decline to 71.1% in Q2 CY’26.
Guo Lei, chief economist at GF Securities, noted in a report that the downward trend in capacity utilisation in the electrical machinery industry has become increasingly evident. In Q2, utilisation fell to its lowest level since CY’20, potentially indicating that supply-demand conditions in the new energy sector remain in need of improvement and that further efforts to address “involutionary” competition are still required.
Some industries targeted by “anti-involution” measures, however, continued to experience improving capacity utilisation. For example, amid divergent demand trends between traditional fuel vehicles and new energy vehicles, the capacity utilisation rate of automobile manufacturing rose to 70.8% in Q2, up 0.5 percentage points from Q1.
Meanwhile, despite continued weakness in infrastructure and real estate demand, capacity utilisation in non-metallic mineral products manufacturing, including cement, construction materials, and glass, remained low at 59.6%, but improved by 2.7 percentage points from the previous quarter.
A positive signal is that capacity utilisation in emerging industries continued to strengthen. In Q2, the capacity utilisation rate of the computer, communication, and other electronic equipment manufacturing industry, a key segment of the AI industry chain, reached a record high of 78.7%, rising 3.3 percentage points from Q1, the largest increase among major industries.
Capacity utilisation in general equipment manufacturing and specialised equipment manufacturing reached 80.1% and 76.7%, respectively, up 1.1 percentage points and 0.1 percentage points from the previous quarter.
Note: This article is published as part of a content exchange agreement between Mysteel Global and BigMint.
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