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 2026, but remained well below the nearly 9 per cent recorded by their global peers, according to the French bank’s latest China corporate monitor presented on Tuesday.

Returns on capital at Chinese firms hovered at around 6 per cent in the same period, compared with more than 11 per cent globally, the report said. The findings were based on a comparison of about 2,300 Chinese firms and 9,000 overseas counterparts.

Alicia Garcia Herrero, chief economist for the Asia-Pacific region at Natixis, highlighted what she described as the “duality of the Chinese economy”, arguing that it extended well beyond macroeconomic data.

“The duality is more complex than just exporting and not consuming,” Garcia Herrero said. “It’s really entrenched in China’s corporate governance.”

The divide was evident in the differing fortunes of central state-owned enterprises (SOEs) and private firms, economists said. The interest burden for central SOEs was falling faster than for private firms, reaching 2.2 per cent and 3.2 per cent, respectively, giving state firms a borrowing advantage. Yet private firms remained more profitable.

“It’s a tale of two cities: stagnant SOEs are benefiting from the system, while private companies are trying to survive in this system and exporting their way out,” Garcia Herrero said.

Gary Ng, senior economist at Natixis, said Chinese firms continued to face challenges in revenue generation and capital returns. However, “the debt burden of Chinese firms has reduced a lot, which is a positive sign”, he added.

“China can easily power AI data centres,” said Natixis economist Haoxin Mu.

Natixis estimated that AI data centres would account for only about 5 per cent of China’s annual increment in power consumption, compared with 48 per cent in the United States, 28 per cent in Europe, and 66 per cent in Japan.

That meant nearly half of the additional energy needed to meet future demand growth in the US could be absorbed by AI data centres.

“This would crowd out other sectors that need energy,” Mu said.

By contrast, China had the “power capability to continue to build data centres”, said Garcia Herrero.

China’s exports of power equipment used in AI data centres had soared in recent years, Mu said, adding that the segment had become a “key engine for China’s export growth”.

Barring international pushback, Garcia Herrero said any Chinese company doing electrical equipment for data centres would do well.