China’s industrial firms recorded their fastest profit growth in six months for March, signaling an uneven economic recovery as the escalating Iran conflict poses new risks to global trade and supply chains.
Data from the National Bureau of Statistics showed industrial profits rose 15.8% year-on-year in March, accelerating from a 15.2% gain in the first two months of 2026. For the first quarter, profits climbed 15.5% as GDP growth reached 5%, rebounding from a three-year low.
However, the figures mask a growing divergence. While AI-related sectors boomed—Shannon Semiconductor reported a 79-fold surge in first-quarter net profit—consumer-facing industries like Kweichow Moutai continued to struggle with weak domestic demand. “There are many uncertainties in the external environment, and the contradiction between strong domestic supply and weak demand still needs to be resolved,” said NBS statistician Yu Weining.
The March data likely does not yet reflect the impact of the Iran war, according to Reuters-cited analysts. The conflict has heightened risks to global demand and supply chains, threatening to further squeeze Chinese manufacturers already facing soft orders. “Moving forward, higher energy prices are likely to translate into higher input costs for producers,” said Lynn Song, ING’s chief economist for Greater China, in a note. Companies may either pass costs to consumers or absorb them through thinner margins.
Policymakers are banking on their campaign to curb “involution”—intense price competition—to support corporate margins, but benefits have been slow to materialize amid a fragile recovery. The industrial profit figures cover firms with annual revenue of at least 20 million yuan ($2.93 million).
As the Iran crisis unfolds, China’s economic trajectory remains uncertain. The combination of external headwinds and domestic demand weakness poses a challenge to Beijing’s growth targets.
Source: ARY News