China’s Industrial Profit Surge Defies Middle East Oil Shock

Industrial firms reported a 15.8 % year-on-year jump in March-month profits, the strongest rise since September 2025, according to the National Bureau of Statistics (NBS). In the first quarter, enterprise profits climbed 15.5 % YoY, the fastest start to a year since 2017 (excluding the pandemic-driven spike in 2021).

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U.S.–Israel strikes on Iran at the end of February triggered a sharp rise in Brent crude, up about 48 % since the attacks. Higher oil prices have pushed up costs for chemicals, fibers and plastics, unsettling global supply chains and raising raw-material expenses for manufacturers worldwide.

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• Equipment manufacturers: +21 % profit YoY (Q1)

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• High-tech manufacturing: +47.4 % profit YoY (Q1)

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• Optical-fiber makers: +336.8 % profit YoY (Q1)

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• Optoelectronics: +43 % profit YoY (Q1)

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• Display-device producers: +36.3 % profit YoY (Q1)

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• Drone manufacturers: +53.8 % profit YoY (Q1)

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• Raw-material producers (including oil refineries): +77.9 % profit YoY (Q1)

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• Non-ferrous-metal firms: +116.7 % profit YoY (Q1)

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These gains helped lift overall enterprise profit to 15.5 % growth in the first three months.

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NBS chief statistician Yu Weining highlighted the 21 % and 47.4 % profit surges in equipment and high-tech sectors. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said robust export performance underpinned the profitability boost but warned that the Middle East conflict could weigh on the economy in the second quarter. Robin Xing, chief China economist at Morgan Stanley, noted that China’s coal-and-renewable-heavy energy mix buffers oil-price volatility and may enable the country to capture export-market-share gains despite the shock.

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Analysts caution that rising energy-import costs could squeeze margins for firms dependent on oil-derived inputs such as chemicals, fibers and plastics. Slowing global demand may also cap export momentum, creating headwinds even as China’s manufacturers show relative resilience.

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The profit surge signals that China’s manufacturing base can absorb external price shocks, potentially expanding its share of export markets. However, continued exposure to higher energy costs and weakened overseas demand could limit growth, informing both policy decisions and investor strategies.

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The second quarter will hinge on oil-price trajectories, global demand trends, and any policy adjustments aimed at mitigating cost pressures. Firms are expected to face tighter margins, while analysts anticipate a mixed performance across sectors.

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• “China is relatively better positioned and may capture pockets of export market-share gains under a sizeable but not extreme energy shock,” — Robin Xing, chief China economist, Morgan Stanley

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• “In a survey of 32 sectors, around 70% of companies indicated "smaller cost shocks and fewer production disruptions" than their global peers, Xing said in a note Monday.” — Robin Xing, chief China economist, Morgan Stanley

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• “The improved profitability for manufacturers was in part underpinned by robust exports, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.” — Zhiwei Zhang, president and chief economist, Pinpoint Asset Management

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• “The Middle East conflict will nonetheless weigh on the economy in the second quarter, as higher energy prices and weakening external demand pose a growing headwind for exporters, Zhang said.” — Zhiwei Zhang, president and chief economist, Pinpoint Asset Management

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