Why are China's factories booming despite US-Iran war risks?
What's the story
China's industrial enterprises witnessed a significant jump in their earnings in March, with profits rising by 15.8% year-on-year. This comes after a 15.2% increase during the first two months of this year, according to data from the National Bureau of Statistics (NBS). The growth rate for Q1 was also above expectations at 15.5%, as per Bloomberg Economics predictions.
Price rebound
Rising factory prices boost upstream earnings
The profit surge comes after factory prices in China increased in March, ending a 3.5-year period of deflation. The rise was driven by higher oil and metal costs, which likely boosted earnings in upstream sectors such as mining. However, consumer-facing industries were affected by rising raw material costs and their inability to pass these on to customers.
Future outlook
Risks of slowing industrial profits loom
High oil prices are expected to continue supporting producer prices but could also weigh on factory output. This could slow down industrial profits in the coming months, unless domestic demand picks up. Since the pandemic, China's industrial sector has been a key driver of economic growth. However, fierce competition and overcapacity had led to profit declines or stagnation for four consecutive years. The trend reversed in early 2026, with electronics manufacturing and metals leading the charge in this recovery.