BEIJING, April 27 (Reuters) - Profits at China's industrial firms grew at their quickest pace in half a year last month, adding to broader signs of an uneven economic recovery in the first quarter as policymakers brace for the impact of the Middle East war.
The country's export engine stuttered last month while retail sales and industrial output cooled, although producer prices emerged from a years-long deflationary stretch, a shift that analysts warn could leave companies boxed in by rising costs
but limited pricing power as demand remains fragile.
Profits at industrial firms rose 15.8% in March from a year earlier, picking up from a 15.2% jump in the January-February period, data released by the National Bureau of Statistics showed on Monday.
For the first quarter, industrial profits grew 15.5% year-on-year as economic growth accelerated to 5% after hitting a three-year low in the previous quarter.
The figures point to growing divergence beneath the surface of the recovery.
While pockets of the economy tied to artificial intelligence remain buoyant, with Shannon Semiconductor posting a 79-fold surge in first-quarter net profit on the back of strong AI-related electronics demand, consumer-facing sectors continue to struggle. Premium liquor maker Kweichow Moutai reported subdued performance as chronically weak domestic demand weighed on pricing and volumes.
Policymakers see their campaign to curb so-called "involution" - persistent, cut-throat price competition - as supportive for corporate margins over time, but its benefits are slow to materialise amid a sputtering recovery.
External risks are adding to the pressure. The Middle East crisis has heightened uncertainty over global demand and supply chains, threatening to further erode margins for Chinese manufacturers already grappling with soft orders and cautious spending by households and businesses.
Industrial profit figures cover firms with annual revenue of at least 20 million yuan ($2.93 million) from their main operations.
($1 = 6.8300 Chinese yuan renminbi)
(Reporting by Qiaoyi Li and Ryan WooEditing by Shri Navaratnam)
