Analysis: AI Boom, Oil Shock Deepen Divide in China Factory Profits
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China’s industrial profit growth accelerated in March, but the recovery remained uneven as rising oil prices boosted upstream sectors and booming investment in artificial intelligence (AI) lifted some manufacturing industries, while consumer-facing manufacturers remained under pressure.
Profits at major industrial firms rose 15.8% from a year earlier in March. First-quarter profit margins reached 5.1%, the highest level for the period since 2022, suggesting rising prices generally supported profitability.
The improvement in profits, however, was uneven across sectors, as some industries were better able to raise prices and pass on higher costs than others. Mining sector profits rose 16.2% in the first quarter, while manufacturing profits increased 19.1%. By contrast, profits in utilities fell 3.2%.
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- China's industrial profits rose 15.8% YoY in March; Q1 margins reached 5.1%, highest since 2022.
- Mining profits +16.2%, manufacturing +19.1%, utilities -3.2% in Q1; non-ferrous metals, electronics doubled; optical fiber +336.8% on AI demand.
- Energy, non-ferrous, AI sectors contributed 52% of March profits, up 14pp; consumer industries reported double-digit declines.
- China International Capital Corp. Ltd.
- Analysts at China International Capital Corp. Ltd. estimated that energy, non-ferrous metals, and AI-related industries contributed 52% of industrial profits in March, up 14 percentage points from the first two months of the year.
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