Thanks to AI and Semiconductors, China Sees 15% Surge in Industrial Profits Last Month

In March, industrial profits in China-including those from manufacturing, mining, and energy sectors-increased by more than 15% compared to the same period last year, despite the shock of surging oil prices due to the Middle East war. This growth was driven by the boom in artificial intelligence (AI) and semiconductors, which boosted manufacturing profitability.

On the 27th (local time), electric vehicles from Chinese company BYD were waiting to be shipped in Suzhou, China. Photo by AFP Yonhap News

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According to the National Bureau of Statistics of China on the 27th, profits for industrial enterprises above a designated size in March rose by 15.8% year-on-year. This is the highest growth rate since September last year. Total profits for the first quarter of this year also increased by 15.5%, recording the fastest pace of growth since 2017. These figures only include industrial companies with annual revenues of at least 20 million yuan.

Notably, advanced manufacturing led these results, as highlighted by the U.S. business media outlet CNBC. Profits in the optical fiber industry surged by over 300%, and the display and optoelectronics sectors also saw growth rates of 30% to 40%. Intelligent industries, such as drone manufacturing, continued to post high growth as well.

Profitability improved as exports increased. Zhang Zhiwei, Chief Economist at Pinpoint Asset Management, analyzed that the improved profitability in manufacturing was partly driven by robust exports. In the first quarter, China’s exports in dollar terms rose by 14.7% year-on-year, marking the fastest growth rate since early 2022.

This trend is notable as it emerged despite the global energy market shock triggered by the situation in the Middle East, the media outlet added. Since the onset of the war, Brent crude oil prices, a global benchmark, have surged by nearly 50%. However, China is believed to have absorbed the shock relatively well, thanks to its energy structure centered on coal and renewable energy. In fact, about 70% of companies surveyed said they suffered less impact compared to global competitors.

However, given the prolonged nature of the war, the outlook remains uncertain. Experts expect that rising oil prices and slowing global demand will become a burden for exports starting from the second quarter of this year.

U.S. sanctions against China are also a variable. On the 24th, the U.S. Department of the Treasury and the State Department announced that they had added China’s Hengli Group, a refinery importing Iranian oil, to the sanctions list. Hengli is regarded as one of China’s representative “teapot” refineries, with a daily crude oil processing capacity of about 400,000 barrels through its refinery in the port city of Dalian in northeastern China. This is expected to affect about a quarter of China’s refining capacity.

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