Qiandongnan, China – October 24: Workers produce jewelry products to fill orders in a workshop ahead of the Double 11 Shopping Festival to be held on October 24, 2026 in Congjiang County, Qiandongnan Miao Dong Autonomous Prefecture, Guizhou Province, China.
Shi Honghui | Visual China Group | Getty Images
China’s industrial profits grew at the fastest pace since June last month as an artificial intelligence-related manufacturing boom offset drag from persistently weak domestic demand.
Profits for large companies rose 14.4% in September compared to the same month last year, according to data released by the National Bureau of Statistics on Tuesday. Industrial profits rose 15.5% in the first nine months of this year, slightly lower than the 15.7% rise in the first nine months.
This strength came as industrial revenues turned to double-digit growth earlier this year, after three consecutive years of declines and a modest increase in 2025, helped by rampant price competition across sectors and the Chinese government’s efforts to curb a surge in demand for AI-related equipment.
Rising commodity prices driven by the global AI boom and the Iran war have boosted profits for miners, chipmakers and raw material suppliers this year, even as downstream manufacturers face higher input costs and weaker domestic demand.
The profit increase came as ex-factory prices rose at the fastest pace since mid-2022, driven by higher energy and raw material prices amid the Middle East conflict.
AI boom vs consumer collapse
Profits growth in high-tech sectors such as AI and robotics has outpaced profits in consumer-related industries such as clothing, automobiles and furniture, highlighting an increasingly polarized economy.
NBS chief statistician Yu Weining said the profit growth was mainly due to a sharp increase in profits in the electronics and advanced technology manufacturing sectors. Electronic specialty materials makers’ profits more than tripled, and semiconductor device equipment makers’ profits rose 51.7% in the nine-month period as demand for AI computing power and storage remained strong.
Thanks to the expansion of AI computing power and data centers, optical fiber manufacturers’ profits increased more than six times, and cable manufacturers’ profits more than doubled in the January-September period compared to the same period last year, Yu said.
Copper and aluminum raw material makers also benefited from increased demand from AI-related and renewable industries, with profits rising nearly 45% over the nine-month period.
Shena Yue, senior economist at Oxford Economics, said high-tech manufacturing investment and electronics equipment utilization rates remain resilient, supported by the global AI cycle and domestic policy priorities. Overall investment and industrial use remain subdued, he said.
Yue said household demand is a weakness as the real estate recession continues to weigh on home purchases and related durable goods. “China’s export strength has not been able to fully offset its domestic weakness,” he said.
Consumption remained weak, with retail sales rising 1.1% in September, better than expected but only slightly above August’s slump.
China’s economy expanded 4.5% year-on-year in the third quarter, slightly faster than the previous quarter, and grew 4.6% in the first nine months, well within the government’s full-year target range of 4.5-5%.
quiet stimulation
The Chinese government has so far refrained from another major domestic demand stimulus package as concerns grow over local government debt and the benefits of consumer trade-in subsidies fade.
Dan Wang, China director at Eurasia Group, said policymakers saw no need to act urgently. Officials are betting that high-tech exports can meet this year’s growth targets as lower prices boost purchasing power even as deflationary pressures mount, he said.
But tensions are rising between businesses and consumers. With China facing its deepest employment crisis in decades, most manufacturers are making “very thin” profits while consumers continue to save rather than spend, with some even running into the red, Wang said.
Wang said debt-laden local governments across the country are also becoming cautious about spending as the Chinese government seeks to rein in local debt and overcapacity. “A lot of money is not being spent because officials fear being held accountable for new projects they approve.”
Pessimism about corporate profitability has also affected Chinese stocks, with the benchmark CSI 300 index slipping into a bear market late last week as a long period of weak consumption and fierce competition hurt profits.
