China industrial profits rise fastest in six months despite cost pressures

China’s industrial profit rebound gathered pace in March, with major industrial firms posting a 15.8% year-on-year gain, the fastest growth in six months. For the first quarter, profits rose 15.5% to 1.696 trillion yuan, but the improvement landed against a tougher backdrop: war-driven energy and raw-material costs, weaker export momentum and signs that China’s broader recovery is still uneven.

The latest figures suggest factories are still finding pockets of strength, especially in sectors tied to advanced manufacturing and new technology. The National Bureau of Statistics of China said the gains were helped by proactive macro policies and stronger momentum in high-end manufacturing, but it also warned that external uncertainties remained elevated and domestic supply-demand imbalances still needed attention. March’s pace marked an acceleration from 15.2% growth in January-February, and it came after industrial profits rose only 0.6% in 2025, the first annual increase in four years.

The most powerful lift came from equipment manufacturing and high-tech production. Equipment manufacturing profits rose 21% in the first quarter and contributed 6.8 percentage points to overall industrial profit growth. High-tech manufacturing was even stronger, with profits up 47.4% and adding 7.9 percentage points to the total. Within that surge, optical fiber manufacturing profits jumped 336.8%, optoelectronic device profits rose 43%, display device profits gained 36.3%, intelligent drone manufacturing profits climbed 53.8% and smart consumer equipment profits increased 67.3%.

Other parts of the industrial base also strengthened. Environmental monitoring equipment profits doubled, lithium-ion battery profits rose 25%, raw materials manufacturing profits increased 77.9%, and non-ferrous metal firms’ profits surged 116.7% in the quarter. Those gains matter because they show that the improvement is not confined to one narrow segment, but they also expose how dependent the rebound is on capital-intensive industries and demand tied to artificial intelligence, chips and upgrading in manufacturing.

That is why the profit jump looks less like a victory lap than a stress test. Higher input costs can still compress margins if companies cannot pass them on, a risk ING’s Song has warned about. CNBC reported that large onshore inventories of Iranian oil and crude on tankers at sea gave China some cushion from the immediate oil shock, but the Middle East conflict still threatens to push up costs across supply chains. For Beijing, the question is no longer whether profits can recover, but whether they can keep rising if external shocks intensify and domestic demand remains fragile.