China's industrial profits surged 15.8% year-on-year in March, defying expectations of a slowdown as the Iran conflict disrupted global oil markets and pushed raw material costs higher.
The National Bureau of Statistics reported the jump, driven by strong demand in high-tech manufacturing and state-backed infrastructure spending, which helped offset the margin squeeze from elevated energy prices.
The data highlights a divergence in the Chinese economy: while export volumes and external trade have remained resilient, domestic manufacturers are increasingly absorbing higher input costs.
Rising Brent and WTI prices, fueled by Middle East shipping risks, are beginning to weigh on profit margins for firms reliant on imported commodities.
Analysts warn that if oil prices remain at current levels, the profit growth trajectory could decelerate in the coming quarters as pass-through pricing to consumers remains constrained.
Market participants are now pricing in a more nuanced recovery for Chinese equities, with energy-intensive sectors facing headwinds while export-oriented and tech-heavy names continue to attract capital.