Analysts say China’s industrial profit recovery is uneven, with gains limited to AI and energy amid weak domestic demand.
China’s reflation remains cost-driven, with industrial profits rising primarily in AI- and oil-related sectors. Higher global commodity prices are the main driver, while domestic demand continues to lag supply, creating an imbalance.
Profit growth in industries linked to overcapacity has been limited, and the supply-demand gap may persist if AI adoption outpaces labor market adjustments. This dynamic could keep prices under downward pressure.
Analysts expect accommodative policies and a low-inflation, low-yield environment to remain in place as rebalancing takes time.