BEIJING: China’s industrial companies have seen their profits soar at the fastest in more than two years, lifted higher by demand for artificial intelligence (AI)-related goods and a surge in oil prices stemming from the Iran war.
Profits soared 24.7% in April from a year ago, accelerating from a 15.8% jump in the previous month, according to data released yesterday by the National Bureau of Statistics (NBS). For the first four months, they increased more than 18%.
Bloomberg Economics had expected a gain of about 19% year-on-year in April.
“The rebound in industrial product prices led to faster growth in profits among industrial companies, with new sectors like equipment and high-tech manufacturing leading them,” Yu Weining, a statistician at the NBS, said in a statement accompanying the release.
The yuan extended gains to trade 0.1% higher at 6.7816 against the dollar in the offshore market following the data. China’s 10-year government bond yield remained steady at 1.74%.
“China’s faster April profit growth shows the energy shock has largely been positive, so far – with faster rises in factory-gate prices boosting earnings.
“The hit to global demand for Chinese manufacturers appears contained for now, based on robust exports in the month,” said economists Eric Zhu.
A global energy crisis triggered by the war in Iran pushed factory inflation in April to the highest level since July 2022, improving the earnings of upstream producers such as oil and gas companies.
In addition, booming investment in AI has led to soaring demand for Chinese electronics from chips to printed circuit boards.
But few economists see a strong pickup of consumer inflation because of soft household spending and private investment, even though China is set to exit economy-wide deflation this quarter.
That means consumer-facing factories will likely struggle to pass on higher raw material costs to clients, resulting in a squeeze on profits.
The divergence in profit growth between upstream and downstream sectors is widening, revealing a split between those industries benefiting from higher oil prices and the AI boom and others like makers of apparel, shoes and furniture.
Earnings by the oil and gas extraction industry expanded 8% in the first four months of 2026 from a year ago, reversing from a decline of 19% for the whole of 2025.
Other raw material producers that rely on oil also benefited from higher prices.
The chemicals sector, for example, had profits soar over 70% in the first four months this year.
The electronics industry, buoyed by higher AI demand and surging chip prices, saw profits climb 108% in the first four months.
It contributed to nearly half of the overall expansion in industrial profit during the period, according to the NBS.
As a result of the chip boom, profits among producers of specialised electronic materials and optical fibers soared over 600% and 340%, respectively, according to the statistics service.
Non-ferrous metals such as aluminium and copper also saw greater demand because of the global AI buildout, driving higher profits for companies that process such metals.
In contrast, a slew of downstream sectors suffered from double-digit declines in profits that are only getting worse.
Furniture makers saw their earnings plunge 54% in the first four months, accelerating from the first quarter’s drop of 45%.
Textile and apparel firms recorded a 14% decrease in profits in the first four months.
Years of weak demand and excessive supply resulted in intense price competition among Chinese industrial firms, driving their profit margin to 5.3% at the end of last year, the lowest in data dating back to 2014.
Their profits have fallen or stagnated for four straight years, before rebounding strongly from early this year. — Bloomberg
