China's Corporate Sector Sees Strongest Profit Growth in Years
Mainland-listed Chinese companies achieved a significant profit rebound in the second quarter of 2026, marking their best earnings season since Q2 2021. Profits surged by an impressive 25.7% year-on-year, according to The Kobeissi Letter, representing the second consecutive quarter of positive growth after a double-digit decline in late 2025.
This improvement is visible across the broader A-share universe. As of August 23, 2026, 1,716 companies listed in Shanghai, Shenzhen, and Beijing had reported their first-half results. These firms collectively recorded 11.21 trillion yuan ($1.56 trillion) in revenue, an increase of 11.51% from the previous year, while combined net profit rose 26.62% to 1.04 trillion yuan, indicating a robust recovery in corporate profitability.
AI and Advanced Manufacturing Drive Recovery
The artificial intelligence investment cycle has emerged as a key catalyst for this earnings surge. Profit growth on Shenzhen’s growth-focused ChiNext market reached 42%, while earnings on Shanghai’s technology-heavy STAR Market saw an astonishing 370% surge, significantly outpacing the broader market.
Companies exposed to AI infrastructure and the semiconductor supply chain reported some of the strongest gains. Optical module maker Zhongji Innolight, for instance, reported first-half revenue of 41.78 billion yuan, up 182.49% year-on-year, with net profit jumping 241.70% to 13.65 billion yuan. This was largely due to strong overseas demand for high-speed optical modules amid rising AI infrastructure investment by major cloud-service providers.
Memory maker Longsys also reported a stellar performance, with first-half revenue increasing by 136.26% to 24.09 billion yuan, and net profit soaring more than 715 times to 10.58 billion yuan. The company cited rising demand for enterprise storage from AI servers and data centers as a primary driver.
Beyond AI and semiconductors, the lithium-battery supply chain is adding another growth engine. CATL, the world's largest electric-vehicle battery maker, reported first-half revenue of 276.92 billion yuan, up 54.8%, with net profit rising 41.98% to 43.28 billion yuan, benefiting from demand for electric vehicles and energy storage.
Cyclical Sectors Also Show Improvement
The recovery is not confined to technology and new-energy companies. Parts of China’s traditional industrial economy are also beginning to recover as product prices and margins improve. At a broader industrial level, profits at large Chinese electronics companies rose 96.9% in the first half, while non-ferrous metal and chemical industry profits increased 99.4% and 67.8%, respectively. This indicates a dual momentum: structural growth in AI, semiconductors, and advanced manufacturing, alongside a cyclical recovery in selected traditional industries.
Earnings Boom Contrasts with Stock Market Weakness
Despite the impressive earnings improvement, stock market performance has moved in the opposite direction. The CSI 300 index has fallen 9% so far this quarter, while the technology-heavy STAR 50 index has declined 29%. This significant divergence highlights a striking disconnect between corporate fundamentals and equity-market performance. The question remains whether stronger profits can eventually translate into a sustained recovery in Chinese stocks.