Editor's note: The article, written by Warwick Powell, adjunct professor at Queensland University of Technology and senior fellow at Taihe Institute, reflects the author's opinions and not necessarily the views of CGTN. 

China's industrial economy is showing signs of renewed dynamism, but not in the way conventional narratives might suggest. According to the National Bureau of Statistics (NBS), the value added of China's major industrial firms above the designated size was up 4.7 percent in October. Within this headline figure, a far more striking pattern emerges: High-tech manufacturing is driving the growth, with the output up 7.2 percent year on year.

This shift is not merely a cyclical uptick in corporate earnings. Viewed through the structural interrelations of production and the dynamics of surplus generation, China's industrial output landscape reveals a system-wide reorientation of productive capacity and relative profitability.

High-tech manufacturing as the engine of industrial growth

The high-tech sector's growth is broad-based and technologically intensive. In September, industrial profits rose sharply in aerospace equipment (+11.3 percent), smarter devices (+81.6 percent), electronic components (+39.7 percent), specialized electronic equipment (+25.5 percent), and optical and precision instruments (+45.2 percent and +17.5 percent), respectively.

These figures signal more than higher final demand: They reflect deep improvements in technology coefficients – the inputs required per unit of output – across multiple interlinked sectors. The rapid expansion of profits in sectors like smarter devices and precision instruments shows how technological upgrading has not only reduced unit costs but also increased the surplus generated per unit of capital employed. In other words, these sectors are becoming more productive sources of surplus, reshaping the distribution of profits across the industrial system.

Technological deepening and profit divergence

A central insight is that relative prices adjust to equalize the general rate of profit across sectors over time. When we see high-tech manufacturing outperforming traditional industries, we are witnessing a transitory divergence in sectoral profit rates. This is a sign of technological deepening rather than speculative excess.

In practical terms, improvements in aerospace, automation and electronics are lowering the cost of intermediate inputs, raising capital productivity, and creating temporary "superprofits." These superprofits serve as signals, drawing investment toward high-productivity sectors, reinforcing China's structural transformation toward advanced manufacturing. This process is not just financial; it is rooted in real changes in productive capacity, which ultimately allow the economy to generate higher surplus without increasing overall input usage.

Recirculation of surplus and systemic adaptability

High-tech profit growth has ripple effects across the industrial network. My proposition here is that surplus generated in one sector circulates through the input–output system, improving the productivity of upstream and downstream sectors.

For instance, the expansion of smarter devices and electronic components enhances the productivity of robotics, telecommunications and precision equipment production. This cascade effect reduces the effective input intensity of multiple sectors simultaneously, enabling the economy to generate more surplus from the same quantity of circulating capital.

This dynamic demonstrates a crucial point – namely that China's industrial system is adaptively reconfiguring itself. The high-tech sector is absorbing capital and labor that might otherwise face diminishing returns in traditional heavy industries, such as steel, cement and conventional machinery. By modulating capacity utilization across sectors, the economy mitigates the classic "falling rate of profit" tendency associated with mature industrial structures.

Implications for investment and industrial policy

China's industrial performance highlights the strategic payoff of technology-driven structural policies. For policymakers, the surge in high-tech profits signals several actionable insights:

Targeted support for innovation-intensive sectors remains critical. Aerospace, electronics, and precision manufacturing are not only high-margin but systemically productive, enhancing the output of intermediate goods used throughout the economy.

Capital allocation should prioritize sectors with dynamic productivity gains. Superprofits in high-tech manufacturing act as a market signal for the reallocation of both financial and real capital toward sectors that can sustainably raise the general rate of profit.

Integration of upstream and downstream sectors amplifies returns. Policies that strengthen domestic supply chains for critical components reinforce productivity gains across the system, supporting resilient industrial growth.

In this context, conventional concerns about "overcapacity" are misleading. What appears as concentrated expansion in high-tech manufacturing is better described as "overpotential" – the economy is unlocking latent productive capability that has been underexploited due to historical underinvestment in technology-intensive sectors. In any case, the emergent capacity delivers globally, enabling developing economies access to products and technologies that have long been out of reach.

Linking profits to macro stability

The interpretation of these figures advanced here also offers insights for broader macroeconomic stability. High-tech manufacturing profits are not just concentrated in a few firms; they support systemic accumulation by improving the productivity of intermediate inputs and creating forward and backward linkages across the industrial network.

● This creates self-reinforcing growth: Higher profitability fuels further investment in technology, which lowers unit costs elsewhere and raises the general surplus rate.

● It also mitigates the need for reliance on speculative credit or excessive fiscal stimulus, as the expansion of surplus is embedded in the real economy, not financial engineering.

Put differently, the high-tech sector is functioning as a stabilizing anchor for industrial profits, absorbing under-utilised capacity from traditional sectors and generating a robust foundation for sustained economic growth.

Long-term significance

China's industrial profit patterns provide a glimpse of a structural transformation that is both deliberate and emergent. The economy is actively reconfiguring the distribution of productive capacity, using high-tech manufacturing as a lever to raise the overall rate of profit while improving the productivity of the entire system.

This shift has several long-term implications:

● It positions China to compete in advanced manufacturing globally, leveraging surplus generated from domestic high-tech sectors to reinvest in R&D and innovation.

● It supports domestic employment and income growth through expansion of higher-value production activities.

● It enhances resilience to external shocks, as surplus generation is increasingly tied to productive technological improvements rather than demand-side fluctuations or speculative financial inflows.

In sum, the surge in high-tech profits is not merely a short-term boom; it reflects a self-renewing, technologically-driven cycle of accumulation. It signals an industrial economy that is both adaptable and forward-looking, capable of sustaining growth through systemic efficiency rather than cyclical stimulus alone.

Conclusion

China's industrial economy is entering a phase in which technology-led sectors drive both profitability and systemic adaptation. The NBS data show that high-tech manufacturing is no longer peripheral; it is the engine of industrial growth, reshaping profit distribution, reconfiguring input–output relationships and establishing a foundation for sustained economic dynamism.

This surge is a sign of structural recalibration, not just short-term cyclical expansion. It demonstrates the capacity of China's industrial system to mobilize capital efficiently, generate surplus through real productivity gains, and reorient the economy toward higher-value production.