Employees work on the production line of solar panels at a workshop of Jiangsu DMEGC New Energy Co., Ltd. on July 22, 2025 in Suqian, Jiangsu Province of China.
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Profits at China’s industrial firms grew at their fastest pace in six months in March, even as the Middle East war upended global oil markets and sent raw material costs soaring.
Industrial profits jumped 15.8% from a year earlier in March, the sharpest growth since September last year, National Bureau of Statistics data showed Monday, accelerating from the 15.2% surge in the first two months of this year.
In the first three months this year, enterprise profits expanded 15.5%, the fastest start to a year since 2017, barring the pandemic-driven spike in 2021.
Yu Weining, chief statistician at NBS, said the accelerated overall profit growth was largely driven by the equipment and high-tech manufacturing sectors, which saw profits soar 21% and 47.4% in the first quarter, respectively.
The artificial intelligence and semiconductor boom drove outsized profit growth across several subsectors in the first three months of the year. Profits for optical fiber makers surged 336.8% from a year earlier, while manufacturers for optoelectronics and display devices posted gains of 43% and 36.3%, respectively.
Demand for intelligent products also lifted earnings across emerging industries. Profits at drone manufacturers jumped 53.8%, while other intelligent consumer device makers gained 67.3%.
Earnings for raw material producers rose 77.9% in the first quarter from a year earlier, as oil refineries swung to a profit. A slew of strategic emerging industries, such as aerospace, new energy, and next-generation information technology, also drove a 116.7% surge in profits at non-ferrous metal firms, according to NBS data.
The upswing follows a period of stabilization in 2025 when industrial companies’ earnings eked out a modest 0.6% growth after three consecutive years of annual declines.
The improved profitability for manufacturers was in part underpinned by robust exports, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. In the first quarter, China’s exports grew 14.7% from a year earlier in U.S. dollars, the fastest pace since early 2022.
The Middle East conflict will nonetheless weigh on the economy in the second quarter, as higher energy prices and weakening external demand pose a growing headwind for exporters, Zhang said.
Cushioning oil shock
The soaring profits came even as rising global oil prices started seeping into the domestic economy, pushing up import costs and threatening to squeeze margins for manufacturers dependent on imported raw materials.
Brent crude oil prices have soared about 48% since the U.S.-Israel strikes on Iran began at the end of February, driving up costs for chemicals, fibers and plastics across the global supply chain.
Enterprises’ profits were already under strain, with tepid domestic demand amid a prolonged property market downturn and a gloomy job market fueling price wars across sectors. The recent rally in metal prices and Beijing’s effort to rein in excess production capacity and curb cutthroat competition have helped ease deflationary pressure in the economy.
China’s producer price growth turned positive in March, driven by higher oil prices, marking the first expansion in more than three years and ending the longest deflationary streak in decades.
Large onshore inventories of Iranian oil and crude on tankers at sea have provided some cushion for the world’s biggest importer. The Trump administration’s naval blockade of the Strait of Hormuz in recent weeks, however, could alter Beijing’s calculus, with roughly half of China’s oil imports transiting the waterway before the war broke out.
The Trump administration said on Friday it had imposed sanctions on an independent “teapot” refinery in China for buying billions of dollars’ worth of Iranian oil, potentially harming a key energy source that accounts for a quarter of Chinese refinery capacity.
— CNBC’s Evelyn Cheng contributed to this report.
