China industrial profits jump 14.4% in September on AI surge

China's large industrial companies reported a 14.4% increase in profits for September compared to the same month last year.

The National Bureau of Statistics released the data on Tuesday, marking the fastest growth rate recorded since June. For the first nine months of 2026, total industrial earnings rose 15.5%, slightly less than the 15.7% gain seen in the same period last year. This marks the return to double-digit growth after 2025, a year that followed three consecutive periods of declining profits.

The recovery is driven primarily by the artificial intelligence sector and government efforts to reduce price competition. Demand for AI-related equipment has boosted earnings for miners, chipmakers, and raw material suppliers. However, manufacturers in other sectors face rising costs as factory-gate prices climbed at their quickest rate since mid-2022. This price increase stems from higher energy and raw material costs linked to the conflict in Iran.

Yu Weining, chief statistician at the National Bureau of Statistics, stated that growth originated mostly from electronics and advanced technology manufacturing. Profits for manufacturers of electronic special materials more than tripled. Semiconductor device equipment makers saw a 51.7% jump in earnings. Optical fiber manufacturers experienced a more than sixfold increase in profits due to data center construction, while cable makers saw profits more than double. Copper and aluminum producers also benefited from AI and renewable energy demand, with profits up nearly 45% over the nine-month period.

The benefits are not evenly distributed. High-tech sectors are outperforming consumer industries such as clothing, autos, and furniture. Shena Yue, a senior economist at Oxford Economics, noted that household demand remains the weak link. She explained that the property downturn continues to weigh on housing purchases and related durable goods. "China's export strength isn't able to fully offset its domestic weakness," she said.

Retail sales grew 1.1% in September, a marginal improvement over August. The economy expanded 4.5% in the third quarter from a year earlier, bringing the growth rate for the first nine months to 4.6%. This figure sits within the government's full-year target range of 4.5% to 5%. Beijing has not yet introduced major new stimulus for domestic demand, citing concerns over local government debt. Dan Wang, China director at Eurasia Group, said policymakers see no urgency to act because falling prices have raised purchasing power. She warned that strains are building as many manufacturers earn thin profits and consumers continue to save rather than spend.

The CSI 300 Index entered a bear market late last week, reflecting doubts about the breadth of corporate profitability.