The Chinese economy is showing an unexpected surge of energy. Profits of Chinese industrial enterprises in April rose by a record 24.7% compared to the same period last year. This is not just a statistical jump, but a signal of a paradigm shift: old problems of deflation and weak purchasing power have been replaced by a powerful driver in the form of high technology and the energy crisis.
Two Engines of Growth: Chips and Barrels
An analysis of data from the National Bureau of Statistics of China shows that in the first four months of the current year, the total profit of the industry grew by more than 18%. Economists name two key reasons for this surge, which work in synergy. First, the global arms race in the field of artificial intelligence has created an insatiable demand for Chinese electronics. Second, geopolitical tensions in the Iran region have pushed up energy prices, which has become an unexpected gift for the mining sectors.
The electronics industry has become a real locomotive of growth. Fueled by the thirst for powerful chips and server equipment for neural networks, the industry showed an explosive growth in profits of 108% for the quarter. It is this sector that provided almost half of the total growth in industry. The figures for manufacturers of specialized materials are particularly impressive: profits of optical fiber manufacturers jumped by 340%, and suppliers of electronic components by more than 600%.
The Energy Paradox
The second driver is oil. Global energy instability, caused by conflicts in the Middle East, led to an increase in inflation at factories, but for raw material producers this turned into a gold mine. The profit of the oil and gas sector, which showed a decline of 19% a year ago, grew by 8% in the first quarter. The chemical industry, which depends on oil prices, showed a growth of 70%.
These positive news immediately reflected on the financial markets. The yuan strengthened, trading at 6.7816 to the dollar, and the yield on government bonds remained stable. Statisticians note that the recovery of industrial product prices allowed companies to get out of the loss zone, especially in the segments of high-tech equipment.
Shadow over the Traditional Sector
However, the picture does not look absolutely rosy. The boom in high technology and raw materials contrasts with the difficult situation of traditional industries. While chips are flying off the shelves, furniture and textile manufacturers continue to lose money. Furniture profits plummeted by 54%, and sewing companies recorded a decline of 14%.
Bloomberg experts warn of a structural gap. Weak domestic demand and excess supply in traditional sectors create fierce price competition. The profitability of such enterprises has fallen to 5.3% — a minimum since 2014. Factories oriented towards the end consumer risk not being able to cope with the growth of costs, as they cannot pass them on to the customer due to the low purchasing power of households.
Thus, the Chinese economy is entering a new phase, where the future depends on the ability to integrate the power of AI and raw materials, without allowing the collapse of traditional industry, which still constitutes a significant part of the country's GDP.