Data from the National Bureau of Statistics showed industrial profits rose 5.3 per cent in December from a year earlier, a sharp reversal from a 13.1 per cent year-on-year contraction in November
China recorded its first annual increase in industrial profits in four years in 2025, official data showed on Tuesday, offering a positive signal for the world’s second-largest economy as authorities moved to curb destructive price wars across key sectors.
Data from the National Bureau of Statistics showed industrial profits rose 5.3 per cent in December from a year earlier, a sharp reversal from a 13.1 per cent year-on-year contraction in November.
For the whole of 2025, profit was up 0.6%, versus a 0.1% increase in the first 11 months. That marked the first annual gain in four years. The December surge played a crucial role in lifting full-year figures back into positive territory after years of persistent decline.
Beijing reins in price wars to ease pressure on margins
The turnaround follows a government push to curb excessive competition and race-to-the-bottom pricing practices that have eroded corporate margins. Policymakers have singled out sectors such as automobiles and solar panels, where aggressive price-cutting amid overcapacity has intensified deflationary pressures and weakened profitability.
Weak growth in the roughly $19 trillion economy has prompted repeated official warnings, with authorities urging companies to prioritise sustainable pricing and long-term stability over market share battles.
Exports offset weak domestic demand
While domestic consumption remained subdued, exports provided critical support to manufacturers. An export boom helped cushion firms from weak demand at home, even as China continued to struggle with years of declining producer prices.
Export diversification away from the United States also helped limit the impact of tariffs imposed by US President Donald Trump on Chinese imports, reducing the economy’s exposure to geopolitical and trade risks.
Auto sector returns to profit on overseas sales
China’s auto industry emerged as a key beneficiary of the export push. Profits in the sector rose 0.6 per cent in 2025, reversing an 8 per cent decline in 2024, driven largely by strong overseas demand for Chinese vehicles.
Foreign companies outperform
State-owned enterprises recorded a 3.9 per cent decline in profits in 2025, underlining ongoing efficiency and reform challenges.
By contrast, profits at privately run firms remained flat, while foreign-invested companies posted a 4.2 per cent increase.
Despite the return to annual profit growth, underlying pressures remain. Producer prices have been falling for several years, signalling persistent deflationary risks and excess capacity in parts of the industrial sector.
Industrial profit figures compiled by the National Bureau of Statistics cover firms with annual revenue of at least 20 million yuan ( around $2.88 million) from their main operations.
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