China’s tech push fuels fastest profit growth in 4 years amid signs of economic divide

China's tech sector is experiencing a boom, with AI demand and local chip production driving significant profit growth for listed companies. The Star Market, home to many chip-heavy firms, saw profits jump over fourfold in the first half of 2026. This performance far outstrips the broader market, which grew at 19.5 percent, highlighting a K-shaped recovery where tech and high-end manufacturing are pulling ahead. Our view is that this growth, while impressive, underscores a widening gap between China's advanced tech industries and traditional sectors. The focus on domestic substitution, particularly in chips, is a key factor. For Asian tech professionals, this suggests continued opportunities in China's AI and semiconductor supply chains, but also a need to watch for potential overcapacity or market saturation as domestic production scales rapidly.