Profits of China's large industries reached 880 billion yuan (about 122 billion dollars) in September 2023, marking a 14.4% increase compared to last year. This growth is considered the strongest increase since last June and is influenced by a boom in AI-related production.
Profit Trends This Year
In the first nine months of this year, profits of China's large industries increased by 15.5%, slightly lower than the 15.7% growth in the same period last year. This profit increase is attributed to the Chinese government's efforts to control price wars in various sectors and the rising demand for AI-related equipment.
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Challenges and Opportunities
Despite profit growth in high-tech sectors, including AI and robotics, consumer industries such as clothing and automobiles face more challenges. According to Yu Wenying, head of China's National Statistics, profit growth is mainly due to increased profits in electronics and advanced technology manufacturing. For example, profits for special electronic materials manufacturers have more than tripled, and profits for semiconductor equipment manufacturers have increased by 51.7%.
Increased demand for AI computing and storage has led to profits for fiber optic manufacturers rising more than sixfold. Additionally, copper and aluminum producers have benefited from increased demand in renewable energy-related industries, with their profits rising nearly 45% in the past nine months.
Economic Outlook and Domestic Demand
However, domestic demand remains weak, and falling housing prices have negatively impacted purchases related to housing and related items. In September, retail sales grew only by 1.1%, which is above expectations but just slightly more than the weak figures from August. China's economy grew by 4.5% in the third quarter, which is slightly faster than the previous quarter.
The Chinese government has refrained from introducing new stimuli for domestic demand, believing that falling prices could help increase purchasing power. However, pressures on businesses and consumers are rising, as many producers face slim profits or even losses, and consumers prefer to save rather than spend.
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