How broad was the improvement as profit growth rebounded in September?

  • Chinese industrial enterprise profits rose 14.4% year on year in September, accelerating from 4.2% in August; cumulative profits in 1–September rose 15.5% year on year, broadly unchanged from the previous reading of 15.7%.
  • JPMorgan believes the acceleration in September came from stronger mining profits, continued growth in technology and energy-related manufacturing, and a smaller drag from utilities. Auto manufacturing, meanwhile, shifted from a modest contributor in August to a significant drag.

Why did technology and mining become pillars of growth?

  • Profits in computer, communications and other electronic equipment manufacturing rose 103.8% year on year in 1–September. Although this slowed from 109.9% in 1–August, the sector remained a major growth engine. Demand for AI computing, servers, communications equipment, electronic components and data center infrastructure provided support.
  • JPMorgan estimates that the sector accounted for 23% of total industrial profits in September, up from approximately 20% in August. Mining profits rose 38.2% year on year in 1–September, accelerating from 35.1% in 1–August, benefiting from higher commodity prices and supply constraints.
  • Among these, safety-related production restrictions pushed up coal prices, and cumulative coal mining profits grew 57.0%; higher international energy prices supported 21.3% profit growth in oil and gas extraction.

Which sectors remain under pressure?

  • Auto manufacturing profits fell 22.8% year on year in 1–September, a steeper decline than the 16.0% drop in 1–August. Weak domestic demand and intense price competition limited automakers’ ability to pass upstream costs on to consumers.
  • Utilities profits fell 14.3% year on year in 1–September, as rising fuel costs continued to squeeze margins; however, the sector’s drag on overall profit growth in September alone narrowed from August.
  • Consumption-related manufacturing remained subdued: profits in agricultural and sideline food processing continued to decline, and food manufacturing profits turned to negative growth. JPMorgan believes the apparent improvement in beverage profits more likely reflected a favorable base and seasonality than a broad recovery in consumer demand.

What will sustain profit growth in October?

  • JPMorgan expects industrial profit growth to remain broadly stable in October: further commodity price increases against the backdrop of the Middle East conflict could boost profits in upstream mining and related manufacturing, offsetting weakness elsewhere.
  • Sustained AI demand and an upward cycle in technology prices are expected to continue supporting technology manufacturing, including electronics. However, higher input costs will also squeeze downstream margins, and domestic consumption-related sectors are unlikely to improve significantly, so profit growth will remain concentrated in relatively few areas.