Profits at China's major industrial firms increased 15.5 percent year on year in the first quarter, data from the National Bureau of Statistics showed on Monday, as economic growth accelerated to 5 percent in the first three months of this year.

For March, profits grew at their quickest pace in half a year, adding to broader signs of an economic recovery in the first quarter as policymakers brace for the impact of the Middle East war.

Profits at industrial firms with annual revenue of at least 20 million yuan from main operations, rose 15.8 percent last month from a year ago, picking up from a 15.2 percent jump in the January-February period.

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 weak domestic demand weighed on pricing and volumes.

"There are many uncertainties in the external environment, and the contradiction between strong domestic supply and weak demand still needs to be resolved," said statistician Yu Weining from the bureau.

An economist said external risks ⁠are adding to the pressure.

"The data has likely not reflected the impact of the Iran war yet," said Lynn Song, ING's chief economist for Greater China, underscoring growing risks to growth at home and abroad from the conflict.

"Moving forward, the higher energy prices are likely to translate into higher input costs for producers, which will either need to be passed on to consumers or absorbed through thinner margins and weaker profitability," ING's Song said. (Reuters & Xinhua)