China industrial profits surge at fastest pace since September in boost for economy

China's industrial profits at large firms rose 15.8% year-on-year in March, the fastest pace since September, with Q1 profits up 15.5%, beating the prior 15.2% reading. Earlier: China imports set to overtake exports for first time since 2021 on AI chip surge Summary China's industrial profits at large firms rose 15.8% year-on-year in March, fastest growth since September 2025 January to March industrial profits rose 15.5% year-on-year, up from 15.2% in the prior reading Data covers industrial firms with annual revenue above 20 million yuan Strong profit growth driven by AI-related manufacturing demand, export momentum and improving pricing power Results come despite headwinds from the Iran war energy shock and global trade uncertainty China's industrial output rose 7.7% year-on-year in Q1 2026, underpinning the profit rebound Weak domestic consumption remains a structural drag but export demand and capital investment are filling the gap China's industrial sector delivered its strongest profit growth in seven months in March, with large firms posting a 15.8% year-on-year gain that exceeded expectations and reinforced the resilience of the country's manufacturing economy in the face of significant external pressures. The data, released by China's National Bureau of Statistics, showed that profits at industrial enterprises with annual revenue above 20 million yuan rose 15.8% in March from a year earlier, the fastest pace of growth since September last year. For the first quarter as a whole, profits were up 15.5% year-on-year, a modest acceleration from the prior reading of 15.2% and a result that will be seen as broadly encouraging given the scale of disruption caused by the Iran war and the associated energy shock. The strength of China's industrial profit picture reflects several overlapping forces that have converged to support the manufacturing sector in recent months. Chief among them is the global artificial intelligence investment boom, which has driven surging demand for chips, advanced manufacturing equipment and the broader supply chain that feeds into AI infrastructure development. China has emerged as a central node in that supply chain, with first-quarter trade data showing imports of integrated circuits soaring 54% year-on-year in March alone, while exports of AI-related goods have continued to climb. Export demand more broadly has provided a powerful tailwind. China's total exports rose 15% year-on-year in the first quarter of 2026, a result that has surprised economists to the upside and driven sharp upward revisions to full-year trade forecasts. Industrial firms have benefited directly from that external demand, with sectors including electric vehicles, solar panels, industrial machinery and electronics all reporting strong order books. Pricing dynamics have also played a role in the profit rebound. After years of deflationary pressure that squeezed margins across the industrial sector, producer prices have begun to stabilise and in some categories recover, supported by higher global commodity prices and a pickup in domestic capital investment. That shift has allowed firms to rebuild profitability without relying solely on volume growth. The results are particularly notable given the headwinds the sector has been navigating. The partial closure of the Strait of Hormuz following the outbreak of the Iran war has disrupted global energy flows and pushed up input costs for energy-intensive industries. Economists had warned that the shock could weigh meaningfully on Chinese industrial output and margins, but the first-quarter data suggests the impact has so far been more contained than feared. China's diversified energy supply base and strategic petroleum reserves have provided a degree of insulation, while the country's dominant position in green energy manufacturing has allowed it to benefit from the surge in global demand for alternatives to fossil fuels. Domestic consumption remains the weak link in China's econom