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(Bloomberg) — China’s industrial companies saw their profits soar at the fastest in more than two years, lifted higher by demand for artificial intelligence-related goods and a surge in oil prices stemming from the Iran war.
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Profits soared 24.7% in April from a year ago, accelerating from a 15.8% jump in the previous month, according to data released on Wednesday by the National Bureau of Statistics. For the first four months, they increased more than 18%.
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Bloomberg Economics had expected a gain of about 19% year on year in April.
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A global energy crisis triggered by the war in Iran pushed factory inflation in April to the highest level since July 2022, improving the earnings of upstream producers such as oil and gas companies. In addition, booming investment in artificial intelligence has led to soaring demand for Chinese electronics from chips to printed circuit boards.
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While China is set to exit economy-wide deflation this quarter, few economists see a strong pickup of consumer inflation because of soft household spending and private investment. That means downstream factories will likely struggle to pass on higher raw material costs to consumers, resulting in a squeeze on profits.
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The divergence in profit growth was already stark in March, revealing a split between those industries benefiting from higher oil prices and the AI boom and others like makers of apparel, shoes and furniture.
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Years of weak demand and excessive supply resulted in intense price competition among Chinese industrial firms, driving their profit margin to 5.3% at the end of last year, the lowest in data dating back to 2014. Their profits have fallen or stagnated for four straight years, before rebounding strongly from early this year.
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