China’s industrial sector is getting a powerful boost from artificial intelligence, with growing demand for computing power, chips and other technology-related products helping businesses deliver strong profit growth during the first seven months of the year.
According to data released by China’s National Bureau of Statistics, profits at major industrial enterprises reached 4.58 trillion yuan, or about $682 billion, between January and July. That represents a 17.6 percent increase compared with the same period last year.
The figure remains impressive, although the pace of growth has slowed from the 18.7 percent recorded during the first half of the year.
At the heart of the growth story is artificial intelligence.
As companies around the world accelerate their adoption of AI, demand for computing power and advanced semiconductor products has increased sharply. China’s electronics sector has emerged as one of the biggest beneficiaries. Profits in the sector jumped 110 percent year-on-year, contributing 9.3 percentage points to overall industrial profit growth.
The integrated circuit industry also delivered an extraordinary performance. Profits in areas including computing and memory chips increased 18.5 times compared with the same period last year.
Yu Weining, chief statistician at the National Bureau of Statistics’ Department of Industrial Statistics, said the rapid expansion is closely connected with the faster application of AI and continued demand for computing power. Rising market demand has also helped push up prices for several related products.
The impact of AI is extending beyond technology companies.
China’s broader industrial transformation is becoming increasingly visible, with profits among major high-tech manufacturers rising 50.1 percent during the first seven months. Nonferrous metal producers also saw profits climb 91.8 percent.
That growth is partly linked to the AI boom. Advanced computing systems, data centers and technology infrastructure require significant quantities of minerals and other raw materials, helping sustain demand and keep prices elevated.
But the picture is far from uniform.
While technology-driven industries are experiencing rapid expansion, several traditional sectors continue to face difficult conditions.
Profits in electrical machinery and equipment manufacturing declined 7.6 percent during the January-to-July period. Automobile manufacturers saw profits fall 20.4 percent, while profits in ferrous-metal smelting and processing dropped a much sharper 51.2 percent.
The contrast highlights a major challenge for China’s economy: the transition from traditional growth engines toward newer industries powered by technology, innovation and advanced manufacturing.
July provided another signal of that transition.
Industrial profits increased 11.2 percent year-on-year during the month, down from 15.1 percent growth in June. It was the third consecutive month in which monthly industrial profit growth slowed.
The slowdown came as industrial production and producer-price growth also moderated.
For businesses and policymakers, the numbers tell a complicated story.
China’s industrial sector is still growing strongly, but the benefits of the new economy have not yet spread evenly across the wider economy. Technology companies and high-tech manufacturers are gaining momentum, while some traditional industries continue to struggle with weaker demand, excess capacity and pressure on margins.
Yu Weining noted that the international environment remains complex and challenging. At the same time, the domestic economy continues to face an imbalance between strong production capacity and relatively weak demand.
That imbalance could become one of the most important issues to address as China moves deeper into its economic transformation.
Analysts say the current divergence between industries reflects a broader challenge: new growth engines are expanding rapidly, but they have not yet created household income and employment on a scale large enough to fully replace the economic contribution of traditional sectors.
Su Jian, director of Peking University’s National Center for Economic Research, said new growth drivers now contribute more than 40 percent of economic growth. However, he pointed out that these industries remain less capable of generating jobs and household income than traditional sectors such as property and infrastructure.
That gap is one of the key pressure points in the transition.
Su argued that efforts to reduce excess capacity should move alongside measures designed to strengthen demand. He also called for faster use of funds that have already been budgeted, with greater emphasis on directing government spending toward households.
Wen Bin, chief economist at China Minsheng Bank, offered a somewhat more positive outlook, saying industrial profits still have room to improve in the coming months.
However, he cautioned that the overall pace of cumulative profit growth could gradually slow from the first-half level because of a higher comparison base and slower improvements in profit margins.
The bigger message is clear: AI is no longer simply a technology story.
It is increasingly becoming an industrial story.
From semiconductor manufacturing and computing infrastructure to minerals and advanced manufacturing, the expansion of AI is creating new demand across multiple layers of the industrial economy. At the same time, the uneven performance between new and traditional industries shows that technological progress alone cannot guarantee a smooth economic transition.
The next challenge will be turning productivity gains and industrial investment into stronger consumer demand, better employment opportunities and broader income growth.
For businesses watching China’s economy, this makes the coming months particularly important. The question is no longer simply how quickly AI can transform industries, but whether the new wave of growth can become broad enough to support the wider economy.
As China continues moving from traditional growth models toward technology-driven development, the balance between innovation, industrial profits, employment and consumer demand will increasingly shape the country’s economic outlook.
In the end, the AI boom may be creating powerful new winners. The real test will be whether those gains can reach far beyond the technology sector and become a stronger foundation for sustainable growth across the economy.
