China’s industrial sector showed signs of stabilisation in the first quarter of 2025, with profits rebounding after a year of declines, though pressure is building as US tariffs threaten to derail the fragile recovery.
Industrial profits rose 0.8% year-on-year to 1.5 trillion yuan (US$205.86bn) in the January–March period, according to National Bureau of Statistics (NBS) data released on Sunday. This marked a reversal from a 3.3% fall in 2024 and a 0.3% decline recorded over the first two months of the year.
In March alone, industrial profits rose 2.6% compared to the same month last year, highlighting a tentative upturn.
Key drivers of recovery
The turnaround was supported by a combination of government stimulus measures, coordinated industrial policies, and sector-specific recoveries:
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Equipment manufacturing profits grew 6.4% in Q1, with the pace accelerating compared to January–February.
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High-tech manufacturing reversed a prior decline to post a 3.5% increase for the quarter, surging 14.3% in March alone.
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Consumer goods trade-in policies helped boost profits in wearable devices by 78.8%, scooters by 65.8%, and kitchen appliances by 21.7%.
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Aerospace manufacturing profits rose 23.9%, and AI-related sectors saw strong gains.
Nearly 60% of industrial sectors recorded profit growth or narrowed their losses during the quarter, with 24 of 41 major sectors showing year-on-year improvement.
Tariff threats and structural challenges
Despite the improvement, officials and analysts warned that risks are mounting.
Washington’s aggressive tariff hikes—raising duties on Chinese goods by up to 145%—have severely disrupted export demand, with no resumption of bilateral trade talks in sight.
While Beijing has urged exporters to shift focus to domestic markets, many export-dependent factories have reported weak local demand, price wars, squeezed margins, and growing payment delays.
The Communist Party’s Politburo last week pledged new support measures, including the rollout of ultra-long special treasury bonds and policy financing instruments aimed at boosting innovation, consumption, and foreign trade.
Mixed performance by ownership type
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Profits at state-owned enterprises dipped 1.4% in Q1.
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Private-sector firms recorded a 0.3% fall.
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Foreign firms operating in China posted a 2.8% gain, highlighting divergent impacts across ownership types.
Industrial profit figures cover companies with annual revenue above 20 million yuan from their primary business operations.
