Employees work on a solar panel production line at the workshop of Jiangsu DMEGC New Energy Co., Ltd. in Suqian, Jiangsu Province, China, on July 22, 2025.
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Profits at Chinese industrial companies grew at the fastest pace in six months in March, even as Middle East wars disrupted global oil markets and sent raw material prices soaring.
Data from the National Bureau of Statistics on Monday showed industrial profits rose 15.8% year-on-year in March, the strongest growth since September last year and an acceleration from the 15.2% rise in the first two months of this year.
Corporate profits rose 15.5% in the first three months of this year, the fastest start to 2021 since 2017, excluding the pandemic surge.
NBS chief statistician Yu Weining highlighted the sharp rise in profits in the equipment and high-tech manufacturing sectors, where profits rose 21% and 47.4%, respectively, in the first quarter.
The artificial intelligence and semiconductor boom has led to strong profit growth across several subsectors in the first three months of this year. Optical fiber manufacturers’ profits increased by 336.8% year-on-year, while optoelectronics and display device manufacturers recorded profits of 43% and 36.3%, respectively.
Demand for intelligent products also boosted revenues across emerging industries, including drone manufacturers and other intelligent consumer device makers, which achieved a 53.8% profit increase.
With refineries turning profitable, profits for raw material producers rose 77.9% in the first quarter compared to the same period last year. According to NBS data, many strategic emerging industries such as aerospace, new energy, and next-generation information technology also increased the profits of nonferrous metal companies by 116.7%.
The rise follows a stabilization period in 2025 when industrial companies’ profits recorded a modest growth of 0.6% after three consecutive years of annual declines.
Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, said the improvement in manufacturing profitability was partly supported by strong exports. China’s exports in the first quarter rose 14.7% year-on-year in US dollar terms, the fastest pace since early 2022.
Still, the Middle East conflict will weigh on the economy in the second quarter, Zhang said, as rising energy prices and weaker external demand become increasingly headwinds for exporters.
Relative resilience under energy shock
The jump in profits comes even as high oil prices have begun to impact the global economy, raising import costs and threatening to squeeze margins for manufacturers that rely on certain raw materials.
brent Since the US and Israeli attack on Iran began in late February, oil prices have soared by about 48%, raising the cost of chemicals, textiles and plastics across global supply chains.
Robin Xin, chief China economist at Morgan Stanley, said China’s energy mix relies heavily on coal and renewables, providing a structural cushion against fluctuations in oil prices.
In a survey of 32 sectors, about 70% of companies said they experienced “less cost shocks and fewer production disruptions” compared to their global peers, Xing said in a note on Monday.
“China is in a relatively advantageous position and could capture some of the export market share under a non-extreme but significant energy shock,” Singh said.
However, the economy is not completely immune from broader impacts: a slowdown in global demand could limit export momentum, while higher energy import costs could pressure margins further down the supply chain.
Corporate profits were already under pressure as a prolonged slump in the real estate market and a bleak employment market weighed on domestic demand, and intensified price competition across sectors.
Recent increases in metal prices and the Chinese government’s efforts to curb overcapacity and cut down on intense competition are helping to ease deflationary pressures on the economy.
China’s producer price inflation turned positive in March due to higher oil prices, marking the first economic expansion in more than three years and ending the longest deflationary trend in decades.
Morgan Stanley expects China’s producer price index, which fell 2.6% last year, to rise 1.2% this year due to a moderate inflationary effect. Consumer prices are expected to rise by 0.8% this year, compared to flat last year.
Large onshore inventories of Iranian oil and crude oil, carried on seaborne tankers, also provide some cushion for the world’s largest importer. But the Trump administration’s naval blockade of the Strait of Hormuz in recent weeks could change Beijing’s calculations that about half of China’s oil imports passed through the Strait before the outbreak of war.
The Trump administration on Friday announced sanctions on China’s independent “teapot” refineries that have bought billions of dollars worth of Iranian crude oil, potentially damaging a key energy source that accounts for a quarter of China’s refinery capacity.
—CNBC’s Evelyn Cheng contributed to this report.
