China Industrial Profits Surge on AI and Chip Boom Despite Oil Market Risks

China’s industrial sector recorded a strong rebound in March, with profits rising sharply as growth in artificial intelligence and semiconductor industries offset mounting pressure from rising global oil prices.

According to data released by the National Bureau of Statistics (NBS), industrial profits increased by 15.8% year-on-year in March, marking the fastest pace of growth in six months. The performance follows a 15.2% rise recorded during the first two months of the year.

For the first quarter of 2026, industrial profits expanded by 15.5% compared to the same period last year, representing the strongest start to a year since 2017, excluding pandemic-related fluctuations.

The growth was largely driven by high-tech manufacturing and equipment sectors. Profits in equipment manufacturing rose by 21%, while high-tech industries recorded a significant increase of 47.4% during the first quarter.

The rapid expansion of artificial intelligence and semiconductor-related industries played a key role in boosting earnings. Optical fiber manufacturers saw profits surge by more than 300%, while companies producing optoelectronics and display technologies also posted strong double-digit growth.

Emerging industries further supported the overall performance, with profits from drone manufacturers increasing by over 50%, and other intelligent consumer device makers reporting gains exceeding 60%.

At the same time, raw material producers experienced a notable recovery, with profits rising by nearly 78% as oil refineries returned to profitability amid higher global energy prices.

Despite the strong momentum, analysts caution that external risks remain. Rising crude oil prices, which have surged significantly since late February amid Middle East tensions, are increasing input costs for manufacturers and could weigh on profit margins in the coming months.

Export growth has also contributed to the improved performance, with shipments rising at their fastest pace in over two years during the first quarter. However, economists warn that weakening global demand and geopolitical uncertainties may pose challenges going forward.

China’s industrial sector had only recently stabilized after several years of declining earnings, recording modest growth in 2025. The latest data suggests a stronger recovery is underway, although sustainability will depend on both domestic demand and global economic conditions.

Officials noted that existing oil inventories and supplies have helped cushion the immediate impact of rising energy costs. However, ongoing disruptions in global oil flows, particularly through key transit routes, could influence economic performance in the second quarter.

The data underscores the growing importance of advanced manufacturing and technology-driven sectors in supporting China’s economic resilience amid a complex global environment.