Latest industrial economic data reveals that China's industrial enterprises above designated size recorded a total profit of 3.95 trillion yuan in the first half of the year, marking an 18.7% year-on-year increase. This growth rate accelerated by 3.2 percentage points compared to the first quarter. However, profits for June alone rose by 15.1% year-on-year, the smallest gain this year and a significant slowdown from May. These figures highlight the uneven nature of the current industrial recovery, with the technology sector and traditional consumer industries displaying divergent trajectories.

Fuelled by the artificial intelligence boom, the technology sector has become the core engine of profit growth. A surge in demand for computing power directly drove electronics industry profits to skyrocket by 96.9% year-on-year, contributing 8.5 percentage points to the profit growth of all industrial enterprises above designated size. Notably, profits in the integrated circuit manufacturing sector surged by an astonishing 2,579.5%. Profits from computer complete unit manufacturing and peripheral equipment manufacturing grew by 689.3% and 305.8% respectively, while profits from electronic special materials manufacturing also doubled. Market analysts attribute this to the accelerated deployment of AI industries and the global expansion of computing infrastructure demand, making the electronics sector the most critical growth driver for industrial profits. Meanwhile, benefiting from rising commodity prices, the raw materials manufacturing sector also performed strongly. Profits in non-ferrous metal smelting and rolling processing rose by 99.4%, chemical raw materials and chemical products manufacturing increased by 67.8%, and coal mining and washing grew by 41.1%.

In sharp contrast to the explosive growth in upstream technology and raw materials sectors, downstream consumer-related industries are facing dual pressures from weak demand and rising costs. In the first half of the year, profits in the automotive industry fell by 19.5% year-on-year, with a profit margin of only 3.8%, far below the 6.5% average for industrial enterprises downstream. Industry analysis indicates that high upstream raw material prices and firm battery prices are the main reasons for the pressure on profits, challenging the sustainability of automakers' earnings. Furthermore, profits in furniture manufacturing dropped by nearly 53% year-on-year, agricultural and sideline food processing decreased by 12.0%, non-metallic mineral products fell by 47.8%, and ferrous metal smelting and rolling processing declined by 25.0%. Some economists describe this phenomenon as a K-shaped divergence, where information technology and energy-related industries profited greatly from AI demand and rising global energy prices, while downstream consumer goods industries see continuous profit declines. Related research suggests that excluding the two major growth poles of AI, non-ferrous metals, and the energy-petrochemical industry chains, profits in other industries actually declined year-on-year in the first half.

Facing a complex and changing external environment and uncertainty in international commodity price trends, industrial enterprises also confront issues such as insufficient market demand and significant pressure on capital turnover. Officials state that future efforts must focus on cultivating and strengthening emerging industries while transforming and upgrading traditional ones, promoting a smooth transition between old and new growth drivers. Currently, the AI boom is profoundly reshaping the profit distribution landscape of China's industrial economy. Whether the explosive growth in the technology sector can be sustained and whether traditional industries can stabilize and recover with policy support will be key to determining the overall direction of the industrial economy in the second half of the year. After all, tailwinds for AI-related industries may persist, but other sectors of the economy may face stronger headwinds.