Profits of Chinese industrial firms grew by 15.8 percent last month.
Growth was driven especially by the AI boom and the semiconductor industry, while the Middle East crisis raising oil prices acted as a headwind. High-tech sectors in particular performed strongly; China’s stable production of coal and renewable energy, combined with large oil reserves, shielded the national economy from energy shocks, even though export outlooks remained otherwise challenging.
Key Points
Industrial profits jumped 15.8% from a year earlier in March.
In the first three months this year, enterprise profits expanded 15.5% from a year earlier.
Large onshore inventories of Iranian oil and crude on tankers at sea have provided some cushion for the world’s biggest importer.
Michael Pettis speculates in his blog that China’s strong GDP growth may have been due to a potential increase in inventories.
Change in GDP = Change in consumption + Change in investment + Change in net exports.
All of these have been soft in the data releases. Why did GDP still grow by 5%? There could be many explanations, of course, but hoarding inventories would be a logical explanation. The problem is that inventories bought on debt do not constitute sustainable economic growth. They cannot be accumulated indefinitely. But more data is needed for a final analysis.
Many analysts have recently noted that China’s stronger-than-expected GDP growth in the first quarter of 2026 is difficult to reconcile with the relative weakness observed in the growth in retail sales, fixed investment, and net exports. The most plausible explanations are:
· part of the difference may be the result of faster growth in services than in retail sales, which implies that the growth in retail sales understated consumption growth, and
· most of the difference may be the result of a rise in inventory accumulation that doesn’t appear in the fixed-asset investment data and that can temporarily boost growth.
While this addresses the accounting puzzle, it raises more questions about the quality and sustainability of that growth. Inventory-driven expansion is, by definition, unsustainable. It reflects a mismatch between supply and demand, one that must eventually be corrected.
Chinese trade surprised positively, even though the war in Iran disrupted maritime transport and naturally raised concerns about energy prices.
Exports performed well, but imports grew even faster as Chinese companies are purchasing significant amounts of AI-related chips and data center equipment. Still, there are underlying risks, such as rising energy costs, sluggish domestic consumption, and trade disputes with the US.
According to a report from Bloomberg citing data from the General Administration of Customs released on Saturday, exports climbed 14.1% from a year earlier, a figure that nearly doubled the 8.4% median forecast of economists.
The latest rebound follows a sharp slowdown during the initial month of the conflict, which saw trade routes throughout the Middle East face unprecedented upheaval. The data reveals that imports rose even faster than exports, jumping 25.3% to result in a trade surplus of $84.82 billion.
In China, prices rose more than expected as the war in the Middle East has driven up the prices of oil and various other raw materials. This is particularly evident in industrial costs, of course, but less so in the everyday life of the ordinary consumer.
On the other hand, the article suggests that for China, a slight rise in prices could even be a relief after a long sluggish period, but then again, corporate margins may suffer.
Key Points
Consumer prices ticked up 1.2% in April, exceeding economists’ estimate of 0.9% growth.
The producer price index jumped 2.8% from a year ago, the highest since July 2022.
The global energy shock from the Strait of Hormuz blockade has rippled across industrial sectors.
Data released on Saturday showed China’s crude imports fell 20% in April from a year earlier.
The news below reports that China’s economic growth slowed more than expected last month, naturally influenced by the problems caused by the war in Iran.
Retail sales growth was the weakest since 2022, and additionally, industrial production and investment fell short of forecasts. However, the weakness in domestic demand was offset by strong exports. At the same time, unemployment fell slightly and China managed to agree on major deals with the United States.
Key Points
Retail sales, a gauge of consumption, rose 0.2% last month from a year ago, the weakest growth since December 2022.
China’s industrial output climbed 4.1% in April from a year earlier, undershooting expectations for a 5.9% rise.
Urban fixed asset investment contracted 1.6% in the first four months this year, compared with expectations for 1.6% growth.
Urban unemployment rate edged lower to 5.2%, from 5.4% in March.
China’s development is undeniably worrying. The air has leaked out of the investment bubble. Domestic consumption is really weak. The only thing sustaining growth is exports. But China’s exports are practically the destruction of jobs in other countries (such as the European automotive industry, India’s steel industry) and are causing increasing resentment in the world.
The clear answer to these problems would be to fuel domestic demand, but that has been talked about for nearly 20 years without any concrete action. And the collapse of a historic real estate bubble doesn’t exactly help the situation.
Addition. In another Bloomberg article, there was a good summary of the shares of different export markets for China.
For a small country the size of Finland, such an industrial export model would be “functional” (at the expense of households), because we are such a small country that the rest of the world wouldn’t notice they were paying our bills. But China is roughly a fifth of the global economy, and its reliance on others’ demand is certainly being noticed.
This text published by Titanium would fit into several threads based on its topic. However, I decided to share it here in the China thread because the country was so prominently featured in the article.
The world is moving towards an era where security, technology, and resources guide national decisions more overtly than before. This is also transforming investment markets: emerging markets are no longer just economies of cheap labor, but strategic centers of a new geopolitical balance of power.
Chinese trade envoy Li Chenggang, who opened the APEC meeting, appealed to the region’s economies to strengthen cooperation. He emphasized that APEC should guide economic discussions and implement already agreed-upon measures promptly.
In the background are the meeting between Trump and Xi Jinping, as well as new trade pledges, such as the Boeing order and U.S. agricultural purchases. Representing the United States is Rick Switzer.
Key Points
Beijing’s trade envoy led the meeting as the commerce minister was absent.
China urged APEC economies to back regional cooperation amid trade tensions.
The APEC trade ministers meeting in Suzhou is set to wrap up Saturday.
According to the tweet below, widespread weakness is visible in the Chinese economy; for example, investments fell significantly last month in manufacturing, infrastructure, and especially in the real estate sector.
Forecasts suggest that growth will slow down sharply as rising energy costs weigh on both domestic consumption and foreign demand.
This latest macro comment from @Marianne_Palmu fits well here
China is currently in the midst of the most significant economic transformation in its history. A country that for decades served as an assembly point for cheap mass production and foreign technology is rapidly transitioning toward an era that the Beijing administration calls ”new quality productive forces.” This new industrial strategy is no longer based solely on investment-driven growth, but on innovation, high quality, and extreme digital efficiency. However, it also has its challenges.
Chinese industry picked up significantly in April, especially thanks to electronics, mining, and energy.
On the other hand, consumption is weak, the real estate sector is doing what it’s doing, and many industries are struggling with their problems.
Key Points
Industrial profits hit their fastest growth since late 2023.
Electronics and mining sectors drove gains in factory earnings.
Weak retail spending and property woes continued to weigh on growth.
“China’s industrial profit growth accelerated sharply in April, driven primarily by rising producer prices amid the global energy shock,” Hao Zhou, head of research and chief economist at Guotai Junan International.
“However, the improvement in profitability appears uneven and potentially fragile. Profit gains are concentrated in upstream and high-tech sectors, while many other industries continue to struggle,” he said in a note.
Here is a tweet about how China is increasingly taking a leading role in the automotive industry, while Japan’s momentum is stalling in this sector as well.
China is making it more difficult for retail investors to access U.S. stocks by tightening oversight of foreign brokers.
According to the article, this could direct more money toward Hong Kong and China’s own technology companies. However, the impact on foreign investors is estimated to be relatively small.
Key Points
China is tightening the screws on a long-running way its retail investors could access Wall Street securities.
Analysts say it further reinforces a longer-term shift that steers Chinese capital and companies closer toward Hong Kong.
Chinese companies are increasingly attracting AI talent from the United States.
Tencent’s new AI lead (a former OpenAI researcher) wants to build a long-term AGI organization in China and create the next big AI application.
China has previously focused more on practical applications, but now also plans to invest in “human-level” (AI with human-level or above capabilities) artificial intelligence.
Key Points
The U.S. has focused more on artificial general intelligence than China.
Former OpenAI researcher Yao Shunyu, now chief AI scientist at Tencent, said Friday he aims to develop AGI.
His ambitions come as other Chinese tech companies have hired from Silicon Valley.
China is in the midst of an economic transformation and is attracting AI talent from the United States.
Yesterday marked the anniversary of the Tiananmen Square massacre. 37 years ago, the political regime still in power murdered thousands of students demanding democratic reforms by, among other things, running over them with tanks and shooting them with rifles at close range. China’s internal censorship has systematically removed all material conveying information about the event from its media and domestic internet. A similar line has since been continued in the treatment of local minorities, including the Uyghur genocide, up to the present day.
When considering investing in companies from this country or working for them, it is worth remembering the kind of administration they operate under and what kind of applications their “human-level” AI might have as a result.
China is planning new rules for the fund sector, which are reportedly intended to improve long-term returns for investors and also reduce fund expenses.
At the same time, the activities of fund managers and automated trading would be monitored more closely—sounds typical for China. According to China’s own words, the goal is to make the markets fairer and increase investor confidence.
China’s securities regulator said it is preparing a new reform plan for the fund management industry aimed at improving long-term returns, lowering fees, and strengthening oversight of market activity, according to a statement published Saturday.
China Securities Regulatory Commission Chairman Wu Qing said regulators are studying a three-year action plan to implement new State Council guidelines governing the private fund sector.
China’s exports grew faster than expected last month, driven by demand for AI technology, microchips, and green technology.
Exports to the United States saw their strongest growth in five years, and imports also increased significantly.
However, despite the strong trade figures, China’s domestic consumption, labor market, and real estate sector remain weak. There are also concerns that export growth may slow down if corporate inventory restocking weakens.
Key Points
Exports rose 19.4% from a year earlier in U.S. dollar value terms, accelerating from the 14.1% gain in April.
Imports growth momentum continued to build, expanding 27.4% in May, the outpacing from 25.3% in April.
China’s economy has shown signs of faltering following a strong first-quarter.
China’s demographic development is going to be quite grim, and a correction is no longer possible.
The one-child policy was successful relative to its goals, with the abortion of female infants as a side effect.
Fertility <1.
Well, there will still be a billion Chinese in 2050, but gradually the population will be older and older, of course.
3/ The numbers are brutal.
Population has fallen for four straight years. In 2025: just 7.92 million births vs. 11.31 million deaths — a record natural decline outside Mao’s famine.
Births dropped another 17% in 2025, hitting the lowest level since 1949. Total fertility rate is now ~0.92 (some estimates as low as 0.84).
