From January to April 2026, the profits of industrial enterprises above designated size showed a strong recovery trend.
According to the latest data from the National Bureau of Statistics, cumulative profits increased by 18.2% year-on-year, and the growth rate expanded by 2.7 percentage points from January to March.
Among them, profits in April increased significantly by 24.7% year-on-year, 8.9 percentage points faster than March, and profits have increased for four consecutive months.
Analysts pointed out that the profits of industrial companies have continued to improve significantly, mainly due to the rebound of the factory price index (PPI) driven by high oil prices, the continued improvement of profit margins, and the booming development of the artificial intelligence (AI) industry.
Zhang Di, chief macro analyst at China Galaxy Securities, said that rising prices and profit margins are the main reasons for the rise in corporate profits.
From a price point of view, PPI increased by 1.7% month-on-month in April (previous value was 1.0%), and the year-on-year growth rate has returned to 2.8%.
The petrochemical industry chain has become the core driving force for this round of rising industrial product prices. High crude oil prices coupled with shrinking supply of global chemicals (paraxylene, methanol, polypropylene, etc.) have jointly promoted the accelerated rise in energy and chemical product prices.
From the perspective of profit margins, from January to April, the profit margin of industrial enterprises above designated size was 5.43%, an increase of 0.32 percentage points month-on-month and an increase of 0.56 percentage points year-on-year.
The profit margins of the mining, manufacturing, electricity, heat, gas and water production and supply industries have improved to varying degrees, and corporate profitability has generally recovered.
However, although prices and profit margins have improved, “volume” showed a marginal slowdown in April.
Data from the National Bureau of Statistics showed that the value-added of industrial production increased by 4.1% year-on-year in that month, 1.6 percentage points slower than in March.
In terms of industries, equipment manufacturing and high-tech manufacturing still maintain high growth rates. Advanced manufacturing chains such as electronics, automobiles, and machinery and equipment, as well as export-related industries continue to form the core support for industrial production. However, demand for the real estate chain and some traditional industrial products is still weak.
It can be seen from the comprehensive data of industrial enterprise production, prices, profits and so on that the current industrial economic repair shows clear structural characteristics.
This round of corporate profit recovery is a typical price-driven recovery, rather than demand and output-driven; internal and external demand is differentiated, with strong external demand and strong domestic demand; the industry dimension continues to be deeply differentiated, with high prosperity in the upstream and midstream sectors continuing, while downstream terminal industry profits continue to be under pressure, and the gap between hot and cold industries continues to widen.
Wu Wanyi, a researcher at Huatai Securities, pointed out that since the beginning of this year, the prosperity of the AI and semiconductor industry chains has continued to increase, driving the computer communications industry to maintain high growth rates, and the profits of high-end manufacturing industries such as medicine have also improved significantly.
For example, exports of integrated circuits in April further rose to 99.6% year-on-year from 84.9% in March, boosting exports by about 4.9 percentage points, and profits in the computer communications industry increased by 78.6%.
In addition, the profit growth rate of the pharmaceutical manufacturing industry rebounded to 18.5% from -5.4% in March.
But on the other hand, industry differentiation is even more severe.
In April, the contribution of upstream industries (energy mining, etc.) to the overall profit growth increased by 2.1 percentage points from 3.8 percentage points in March to 5.9 percentage points; among the mid-stream and downstream industries, computer communications contributed 6.8 percentage points to the overall industrial enterprise profit growth, with
Color smelting and chemical products contributed 4.7 and 6.1 percentage points respectively, and the three contributed a total of about 17.5 percentage points. However, the profit growth rate of other industries, especially the downstream manufacturing industries related to domestic demand, such as cement products, food and beverages, entertainment supplies, furniture, etc., is still weak.
Looking to the next stage, the rebound in profits of industrial companies is expected to continue, but industry differentiation may further increase.
Yuan Haixia, president of China Chengxin International Research Institute, said that there are three major supports for the profits of industrial companies: prices are expected to continue to support corporate profits; external demand is expected to remain resilient; infrastructure investment and equipment update demand in the second quarter will provide certain support for industrial production.
However, current terminal consumer demand is still relatively weak, which poses a great restriction on the profits of industrial enterprises, especially downstream industries.
At the same time, if the U.S.-Iran negotiations do not progress smoothly and crude oil prices continue to remain high, global purchasing power will be weakened, which will in turn restrict my country’s export growth and have a certain negative impact on the profits of industrial companies.
Wen Bin, chief economist of China Minsheng Bank, also expressed similar views.
He believes that from a domestic perspective, the support of stabilizing growth policies, price repairs, cost improvements and new driving forces are still there, but the contradiction between strong supply and weak demand has not been fundamentally alleviated, and the repair of industrial profits is still structural.
Next, industry differentiation may further increase.
High oil prices will temporarily support the profits of upstream resource products, petroleum processing and some raw material industries, but will also squeeze profits of mid- and downstream manufacturing industries by raising the cost of energy, transportation and intermediate products, and cause disruptions to external demand, shipping and supply chains.
Overall, the characteristics of upstream industry being stronger than midstream and downstream industries and advanced manufacturing being stronger than traditional industries may be further deepened.
