China Industrial Profits Surge on AI Boom, Fastest in 2 Yrs

China’s industrial profits grew at their fastest pace in over two years in April 2026, surging 24.7% year-on-year as an artificial intelligence boom supercharged demand for semiconductors, electronics, and high-tech manufacturing equipment, according to data from the National Bureau of Statistics.

For the January–April period, total profits at China’s major industrial enterprises reached 2,435.84 billion yuan (~$336 billion), up 18.2% year-on-year — accelerating from 15.5% growth in the first quarter, Caixin Global reported. The headline figures, however, mask a deeply uneven recovery, with traditional manufacturing and consumer goods sectors continuing to struggle.

AI and Semiconductors Lead the Charge

High-tech manufacturing was the standout performer, with profits surging 44.8% in the first four months and contributing 7.8 percentage points to overall industrial profit growth, according to NBS statistician Yu Weining. The computer, communications, and other electronic equipment manufacturing sector saw profits more than double, rising 107.7% year-on-year in January–April, as Global Times reported.

Within the semiconductor supply chain, the numbers were even more striking. Electronic special materials manufacturing profits soared 601.7%, optical fiber manufacturing jumped 347.6%, and optoelectronic device manufacturing rose 51%, according to NBS data cited by Global Times. Industrial automation sectors also posted strong gains, with manufacturers of industrial control computers and systems seeing profits rise 128.6%.

“Two major factors are behind the upturn,” Ma Jihua, a veteran semiconductor industry expert, told Global Times. “First, the thriving AI industry has spurred strong demand for semiconductors, optoelectronic products and electronic materials. Second, domestic substitution is gathering pace, backed by a complete supply chain and large-scale manufacturing capacity.”

Domestic Substitution Accelerates

The profit surge is not merely cyclical but reflects a structural shift in China’s industrial landscape. US export controls on advanced semiconductors and chip-making equipment have accelerated the push for “domestic substitution” (国产替代), with Chinese manufacturers increasingly sourcing locally made chips.

Hu Qimu, a professor at the Maritime Silk Road Institute of Huaqiao University, told Global Times that “facing repeated US attempts to curb China’s advanced chip development, domestic enterprises are increasingly adopting locally made chips to keep supply chains stable. This trend has translated into growing order books and improved profitability for domestic integrated circuit manufacturers.”

The data supports this assessment: integrated circuit exports surged 78.3% year-on-year in January–April, while investment in integrated circuit manufacturing rose 11.6%, according to NBS figures.

Global Context: Semiconductor Boom

China’s AI-driven industrial expansion is part of a global phenomenon. Global semiconductor revenue is projected to exceed $1.3 trillion in 2026, exhibiting the highest growth in two decades, according to Gartner. “Amid high demand for AI processing, data center networking and power, and memory price inflation, the semiconductor industry is projected to achieve a third consecutive year of double-digit growth in 2026,” said Rajeev Rajput, senior principal analyst at Gartner.

Oil Prices Boost Petrochemicals

Rising crude oil prices — climbing to $100–$106 per barrel amid Middle East geopolitical tensions — provided an additional tailwind, boosting profits in the petrochemical and refining sectors. Profits in raw chemical materials and chemical products rose 73.4% in January–April, while nonferrous metal smelting and rolling profits surged 117.8%, as CryptoBriefing reported.

The Two-Speed Economy

Despite the impressive headline numbers, the recovery remains highly uneven. While AI-related sectors posted explosive growth, traditional industries continued to decline. Automakers saw profits fall 16.8%, electrical machinery dropped 11.4%, ferrous metals smelting plunged 51.5%, and furniture manufacturing tumbled 54.4%. Consumer goods sectors also remained weak, with food processing down 11.8% and liquor production falling 14.3%.

Yu Weining, the NBS statistician, attributed the overall improvement to “the government’s proactive and effective macro-economic policies,” noting that “industrial output has expanded significantly and industrial product prices have also rebounded.” He added that “new growth drivers including equipment manufacturing and high-tech manufacturing have played a strong role.”

What to Watch

The sustainability of the AI-driven profit surge depends on several factors: whether global semiconductor demand remains elevated, how further US export controls may impact China’s domestic chip industry, and whether consumer demand eventually recovers to support the lagging sectors. For now, China’s industrial economy is increasingly defined by a stark divide between the high-tech winners riding the AI wave and the traditional industries left behind.