China Industrial Profits Rise at Fastest Pace Since June as AI Boom Deepens Economic Split

Profits at China's large industrial firms rose 14.4% in September from a year earlier, the strongest pace since June, as a manufacturing surge linked to artificial intelligence offset the drag from weak domestic demand. The National Bureau of Statistics released the figures on Tuesday.

For the first nine months of the year, industrial profits climbed 15.5%, a touch below the 15.7% gain recorded for the January-September period. Earnings moved into double-digit growth earlier this year after a modest rise in 2025, which followed three straight years of declines. Beijing's push to curb price wars across sectors and strong demand for AI-related equipment helped the recovery.

The global AI boom and higher commodity prices tied to the war in Iran have lifted earnings for miners, chipmakers and raw-material suppliers. Downstream manufacturers, however, face rising input costs. Factory-gate prices rose at their fastest pace since mid-2022, pushed up by higher energy and raw material costs amid the Middle East conflict.

The gains are uneven. Profit growth in high-tech sectors such as AI and robotics has outpaced consumer-related industries including clothing, autos and furniture, which underlines how divided the economy has become.

NBS Chief Statistician Yu Weining said the growth came mostly from electronics and advanced-technology manufacturing. Profits for makers of electronic special materials more than tripled, and those for semiconductor device equipment makers jumped 51.7%, as demand for AI computing power and storage stayed strong. The buildout of computing capacity and data centers lifted profits at optical fiber manufacturers more than sixfold, while cable makers saw profits more than double. Copper and aluminum producers also gained from AI-related and renewable demand, with profits up nearly 45% over the nine months.

Shena Yue, senior economist at Oxford Economics, said high-tech manufacturing investment and electronics capacity utilization remain resilient, supported by the global AI cycle and domestic policy priorities. Overall investment and industrial utilization are still subdued, she said. She described household demand as the weak link, with the property downturn weighing on housing purchases and related durables. "China's export strength isn't able to fully offset its domestic weakness," she said.

Consumption remains soft. Retail sales grew 1.1% in September, beating forecasts but only marginally above August's weak reading. The economy expanded 4.5% in the third quarter from a year earlier, slightly faster than the previous quarter, bringing growth for the first nine months to 4.6%. That sits within the government's full-year target range of 4.5% to 5%.

Beijing has so far held back from major new stimulus for domestic demand, amid mounting concerns over local government debt and fading benefits from consumer trade-in subsidies. Dan Wang, China director at Eurasia Group, said policymakers see no urgency to act, since falling prices have raised purchasing power and officials are counting on tech exports to meet this year's growth target.

Wang warned that strains are building. Most manufacturers earn "very thin" profits and some operate at a loss, while consumers keep saving rather than spending amid what she called the most severe employment crisis in decades. Indebted local governments are also reluctant to spend, she said, because officials fear being held accountable for projects they have approved. Doubts about the breadth of corporate profitability have also weighed on stocks, pushing the benchmark CSI 300 Index into a bear market late last week.