China's industrial profits grew at a faster pace in September, though a deepening divergence across the economy weighed on business earnings, Reuters reported on Tuesday, citing data from the National Bureau of Statistics (NBS). Profits rose 14.4% from a year earlier last month, quickening from a 4.2% increase in August. Profits were up 15.5% in the first nine months of the year, largely unchanged from the 15.7% increase in January-August.

Source: Reuters, citing NBS

The sectoral divide remained pronounced. Profits in computer, communication and other electronic equipment manufacturing more than doubled over the nine-month period — up 103.8%, according to reporting of the same NBS release — whereas profits in furniture manufacturing fell 51.3%, making it one of the worst performers.

Source: Morningstar / Dow Jones, reporting NBS

AI hardware is doing the heavy lifting

NBS chief statistician Yu Weining said new growth drivers played a prominent role, with electronics the biggest contributor to profit growth in the nine months, adding 9.6 percentage points to overall expansion. High-tech manufacturing profits rose 52.0% in the period and accounted for 25.5% of total industrial profit. Demand for AI computing helped electronic materials makers more than triple profits, while optical-fibre makers' profits surged almost six-fold, the Dow Jones reporting said.

Bloomberg, reporting the same release, said producer prices surged 5% in September from a year earlier, the fastest pace since 2022, lifted by higher energy costs as hostilities flared across the Middle East, and that Bloomberg Economics had forecast a 12% jump in profits. It quoted Bloomberg Economics' Eric Zhu as saying gains were still concentrated in a narrow set of sectors, while the broader corporate sector struggled with weak domestic demand and intense price competition.

Source: Bloomberg via Energy Connects

CITIC Bank International's chief China economist Ding Meng told Reuters the figures suggest demand generated by the AI supply chain has become a key force supporting industrial profits, and that profits could keep growing rapidly barring a major reversal in the global AI investment boom. Reuters also noted export-oriented firms are bracing for greater uncertainty as expanding trade surpluses stoke tensions with trading partners, particularly Europe, and that third-quarter GDP growth of 4.5% put China within reach of its annual target of 4.5% to 5.0%, even as the recovery remains unbalanced.