Chinese companies are recording their biggest profit surge in more than three years. However, investors remain more focused on the evolution of tensions between Beijing and Washington than on the corporate earnings themselves.

Rising benefits, but trade tension weighs more

According to data from a research firm, the profits of companies listed on domestic markets increased by 5.8% year-on-year in the third quarter of 2025, the biggest jump since mid-2021. In the previous quarter, growth had been just 1.6%.

The CSI 300 index -a benchmark for Chinese equities- advanced for five consecutive months until September, although its streak was interrupted after the intensification of trade tensions in early October. Nevertheless, recent diplomatic efforts between the United States and China have restored some optimism to the market.

“While improving earnings helps with margins, we believe that trade talks and retail flows linked to the AI boom are more decisive factors for Chinese equities,” explained Homin Lee, macro strategist at Lombard Odier in Singapore.

AI and commodities lead; consumption and housing remain weak

The recovery is not homogeneous. The greatest advances are concentrated in sectors such as artificial intelligence, materials, and mining, benefiting from Beijing's strategy to reduce excess capacity and promote national technology.

Cambricon Technologies, known as “China's Nvidia,” multiplied its quarterly revenue by 14 thanks to the growing demand for AI chips. Meanwhile, Zijin Mining Group -one of the largest gold producers in the world- increased its net profit by 57%, driven by the gold rally.

In contrast, sectors linked to consumption and real estate continue to lag behind. Guangzhou Zhujiang Brewery recorded its first revenue decline since 2022, while Poly Developments & Holdings moved into losses.

Trump and Xi Jinping will define the immediate direction of the market

The anticipated meeting between Donald Trump and Xi Jinping, scheduled for this Thursday in South Korea, will be decisive for investor sentiment. The confirmation of progress in trade negotiations caused the CSI 300 to rise by 1.2% on Monday.

Opinions on Wall Street are divided. Some firms maintain a bullish outlook, while others recommend caution. “We advise focusing on quality stocks with high visibility of profits and dividends, while the business landscape clarifies,” indicated an investment firm in a note dated October 23.