China industrial profits jump 15.8% in March

Source Credit : Portfolio Prints

Profits at China’s industrial firms rose at their fastest pace in six months in March, underscoring the sector’s resilience even as the Middle East conflict roiled global oil markets and pushed raw material costs sharply higher.

Industrial profits increased 15.8% year-on-year in March—the strongest growth since September—accelerating from a 15.2% rise in the first two months of the year, according to data released by the National Bureau of Statistics. For the first quarter as a whole, profits climbed 15.5%, marking the fastest start to a year since 2017, excluding the pandemic-driven surge in 2021.

Momentum was particularly strong in advanced manufacturing. Yu Weining, chief statistician at the NBS, highlighted robust gains in equipment and high-tech manufacturing, where profits rose 21% and 47.4%, respectively, in the first quarter.

The ongoing boom in artificial intelligence and semiconductors fueled outsized gains across multiple subsectors. Profits for optical fiber manufacturers surged an extraordinary 336.8% year-on-year, while optoelectronics and display device makers posted increases of 43% and 36.3%, respectively.



Demand for intelligent and connected products also lifted earnings across emerging industries, with drone manufacturers reporting a 53.8% jump in profits alongside gains among other smart consumer device producers.

Upstream industries also rebounded strongly. Profits for raw material producers rose 77.9% in the first quarter as oil refineries returned to profitability. Strategic sectors—including aerospace, new energy, and next-generation information technology—helped drive a 116.7% surge in profits among non-ferrous metal firms.

The latest upswing follows a period of stabilization in 2025, when industrial profits edged up just 0.6% after three consecutive years of decline.

Stronger exports have played a key supporting role. According to Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, China’s exports grew 14.7% year-on-year in U.S. dollar terms in the first quarter—the fastest pace since early 2022.

However, external risks are building. The Middle East conflict is expected to weigh on second-quarter growth, as elevated energy prices and softer global demand create headwinds for exporters.

Rising oil prices are already feeding into the global economy, increasing import costs and threatening to compress margins for manufacturers reliant on raw materials. Benchmark Brent crude oil prices have surged roughly 48% since U.S.-Israel strikes on Iran began in late February, lifting costs for chemicals, fibers, and plastics across supply chains.

China’s energy structure—anchored in coal and renewables—has provided a degree of insulation from oil price volatility, according to Robin Xing, chief China economist at Morgan Stanley. A survey of 32 sectors showed that around 70% of firms experienced smaller cost shocks and fewer production disruptions than their global peers.

“China is relatively better positioned and may capture pockets of export market-share gains under a sizeable but not extreme energy shock,” Xing noted.

Still, the economy is not immune to broader global pressures. Slowing external demand could cap export momentum, while rising energy import costs continue to squeeze margins further down the supply chain.

Domestic challenges remain a drag. A prolonged property market downturn and a weak job market have weighed on demand, intensifying price competition across industries.

That said, a recent rally in metal prices and Beijing’s efforts to curb excess capacity and reduce aggressive competition have helped ease deflationary pressures. Producer prices turned positive in March—driven largely by higher oil costs—ending the longest deflationary streak in decades and marking the first expansion in over three years.

Morgan Stanley expects this modest inflationary impulse to push China’s producer price index up 1.2% this year, following a 2.6% decline last year, while consumer prices are projected to rise 0.8% after remaining flat.

Meanwhile, large onshore inventories of Iranian crude and oil stored on tankers have provided a temporary buffer for the world’s largest importer. However, tensions around the Strait of Hormuz tensions—through which roughly half of China’s oil imports once flowed—could significantly alter the outlook.

Compounding the risks, the Trump administration has imposed sanctions on an independent Chinese “teapot” refinery for purchasing Iranian oil, potentially disrupting a key energy source that accounts for roughly a quarter of the country’s refining capacity.