Chinese firms trail global peers on profits, but AI power boom offers bright spot: Natixis
China’s corporate sector remains considerably weaker than it was before the Covid-19 pandemic, but the country is emerging as a key beneficiary of the global artificial intelligence boom thanks to its ample power capacity, according to a Natixis survey of thousands of firms and a separate research report. Profit margins at Chinese firms had stabilised at about 4.5 per cent for the first half of…
Despite the Chinese corporate sector lagging behind global counterparts in profits, Natixis has identified a promising outlook for the country due to its robust power capacity and the global artificial intelligence (AI) boom. According to a Natixis survey and research report, Chinese firms' profit margins were around 4.5% in the first half of 2026, significantly lower than their global peers' nearly 9%, while returns on capital were at 6% compared to over 11% worldwide.
These figures were based on a comparison of approximately 2,300 Chinese firms and 9,000 overseas counterparts.
Chief economist Alicia Garcia Herrero highlighted the "duality of the Chinese economy," emphasizing that it extends beyond macroeconomic data and is deeply rooted in corporate governance. The situation is divided between stagnant state-owned enterprises (SOEs) that benefit from the system and private firms trying to survive and export their way out.
The report noted that SOEs have a lower interest burden than private firms, which could provide them with a borrowing advantage. However, private firms remain more profitable. Gary Ng, a senior economist at Natixis, mentioned that while Chinese firms continue to face challenges in revenue generation and capital returns, the debt burden has significantly reduced, which is a positive sign.
Despite these weaknesses, Natixis sees China as a major beneficiary of the AI era, particularly in energy capacity. Haoxin Mu, an economist at Natixis, explained that China can easily power AI data centers, estimating that AI data centers would account for only about 5% of China's annual increase in power consumption, compared to 48% in the United States, 28% in Europe, and 66% in Japan. This means China's power capability to build more data centers may not crowd out other energy-intensive sectors.
Additionally, China's exports of power equipment for AI data centers have surged in recent years, becoming a key engine for China's export growth. With international pushback unlikely, Natixis predicts that any Chinese company involved in electrical equipment for data centers would likely perform well.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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