China's Industrial Profits Hit a 6-Month High

China's industrial firms ended 2025 on a low, with economic growth hitting a three-year low in the final quarter. But the first quarter of 2026 told a different story. Industrial profits rose 15.8% in March compared to a year earlier, the fastest growth in six months, accelerating from a 15.2% rise in January and February. For the full first quarter, profits grew 15.5% year-on-year, as overall economic growth climbed to 5%. AI-linked sectors led the surge, with Shannon Semiconductor posting a 79-fold jump in first-quarter net profit. However, serious risks are building beneath the surface. Consumer-facing sectors remain weak, domestic demand is struggling, and the Iran war's impact on supply chains and energy costs has not yet shown up in the data. ING's chief economist for Greater China, Lynn Song, warned that higher energy prices will either be passed on to consumers or eat directly into company profits, threatening the recovery ahead.