China industrial profits jump 14.4% in September on AI demand

Profits at China's large industrial firms rose 14.4% in September from a year earlier, the fastest pace of growth since June, according to official data released Tuesday. The surge was driven by a manufacturing boom tied to artificial intelligence, which offset the continued drag from weak domestic demand.

For the first nine months of the year, industrial profits climbed 15.5%, a figure slightly below the 15.7% rise recorded in the same period last year. This marks a significant shift for industrial earnings, which swung to double-digit growth earlier this year after a modest gain in 2025 followed three consecutive years of declines.

Beijing's efforts to curb price wars across sectors and the surging global demand for AI-related equipment have contributed to this recovery. The global AI boom, along with higher commodity prices stemming from the war in Iran, has lifted earnings for miners, chipmakers, and raw-material suppliers. However, downstream manufacturers continue to face rising input costs and sluggish domestic consumption.

Earnings growth in high-tech sectors, including AI and robotics, has outperformed profits in consumer-related industries such as clothing, autos, and furniture. The broader economy expanded 4.5% in the third quarter from a year earlier, a pace slightly faster than the previous quarter. This pushed growth in the first nine months to 4.6%, keeping it within the government's full-year target range of 4.5% to 5%.

Despite the industrial strength, consumption remains soft. Retail sales grew 1.1% in September, a marginally better result than August's weak reading that beat forecasts. With concerns mounting over local government debt and the fading benefits of consumer trade-in subsidies, Beijing has so far held back from introducing major new stimulus for domestic demand.

Shena Yue, a senior economist at Oxford Economics, noted that high-tech manufacturing investment and electronics capacity utilization remain resilient due to the global AI cycle and domestic policy priorities. However, she added that overall investment and industrial utilization are still subdued. Yue identified household demand as the weak link, as the property downturn continues to weigh on housing purchases and related durables.

"China's export strength isn't able to fully offset its domestic weakness," Yue said.