Last updated : September 2026
China’s companies just reported their best profit growth in five years. However, the stock market is still falling. Even though companies made 25.7% more money from April to June, the main stock market index (CSI 300) dropped about 9%. The technology index (STAR 50) dropped 29%.
Overall, listed companies made 3.58 trillion yuan ($532.7 billion) in the first half of 2026. This is a 19.5% increase from last year. But this good news hides a divided market. The profits are mostly going to a few tech companies, while the rest of the economy struggles with high costs and weak shopping habits.
The Uneven Profits
The big 25.7% profit jump is not shared by everyone. Most of the money was made by technology and Artificial Intelligence (AI) companies. Other regular companies did not grow much.
Investors already expected tech companies to do well, so stock prices were already very high before the news came out. By June, the STAR 50 index had already gone up 76%, setting a very high bar for success.
High Costs of AI
A big problem is that AI costs a lot of money. Chinese companies are spending heavily on AI computers and equipment. Investors see this huge spending as a quick loss of cash, not a guaranteed future win.
For example, Tencent spent 176% more on equipment, which hurt its available cash. Alibaba also saw its profits drop because it spent so much on AI. An expert named Vey-Sern Ling said investors are worried because they do not know if these AI investments will ever pay off.
Struggles in Cars and Housing
Outside of tech, the economy is still weak. People are not spending much money, and the housing market is in trouble. Car companies are selling more cars abroad, but making less money because they are cutting prices to compete in China. For example, BYD’s profits fell 20.5%.
Real estate companies are also struggling. China Vanke lost 14.95 billion yuan (about $2.2 billion) in the first half of the year because housing sales dropped 48.2%. Even Kweichow Moutai, a famous liquor brand, saw a drop in profits because traditional stores sold less, though its online sales grew fast.
Currency, Taxes, and New Stocks
Companies face other problems too. A stronger Chinese currency caused companies to lose 107 billion yuan ($16 billion) when trading money. The government is also collecting more overdue taxes, which takes cash away from businesses. Finally, new companies selling stock for the first time (IPOs) are taking investor money away from older companies.
Future Outlook
It is not all bad news. Some experts believe the market will improve. Meng Lei from UBS Securities thinks companies will make 11% more profit this year because the economy is slowly healing. Big banks also made good profits recently. But for now, the stock market is stuck because high AI costs and weak consumer habits outweigh the record profits.
Frequently Asked Questions
Why did China’s stock market fall despite record profit growth?
The profit growth was mostly limited to AI and tech companies. The rest of the economy is still dealing with weak shopping demand, a bad housing market, and high taxes.
Which companies made the most money?
Technology, artificial intelligence, and hard-tech sectors saw the biggest gains. For example, some AI memory and chip companies saw their profits jump by over 100%.
Why are AI companies losing stock value if they are growing?
AI companies are spending massive amounts of money to build computer systems. Investors are treating this heavy spending as a large immediate cost and are worried it might not pay off.
How are Chinese car and real estate companies doing?
They are struggling. Car makers like BYD are selling many cars but making less profit because of price cuts. Real estate companies like China Vanke are losing billions of dollars because home sales are very low.
When will the stock market improve?
Some experts predict things will get better later this year. They believe new technologies and a slow economic recovery will eventually help the broader stock market grow.
