China’s industrial sector reported a modest profit growth of 0.6% in 2025, marking the first annual improvement in four years. The upturn followed a series of official measures aimed at curbing intense price competition and was supported by expansion in manufacturing output despite tepid domestic consumption.
Data from the National Bureau of Statistics indicates that profit growth accelerated toward the end of the year, with December alone posting a 5.3% increase from the prior year—the most robust monthly gain since September, when profits jumped 21.6%. This came after a slump of 5.5% in October and 13.1% in November.
Policy actions targeting excessive price reductions across key industries played a central role in stabilizing earnings. In addition, efforts by manufacturers to expand into foreign markets also contributed to the recovery, according to senior economists. December’s improvement in factory activity broke an eight-month contraction streak, partly driven by companies increasing inventories in anticipation of the Lunar New Year.
The earlier downturn in industrial profits was attributed to widespread price competition and diminished consumer demand, which left many firms managing surplus production capacity. Despite this, the economy’s headline growth matched the official 5% target, with overseas sales offsetting subdued domestic spending, aided in part by a one-year U.S.-China trade truce.
Sector performance varied, with the automotive industry recording a 0.6% profit increase after an 8% loss in 2024, driven largely by export growth. Foreign-invested companies saw profits grow by 4.2%, while private firms’ profits were stable. However, state-owned enterprises reported a 3.9% decline for the year.
Retail sales grew by 3.7% in 2025, lagging behind overall economic and industrial production growth, which rose by 5.9%. In response to the slow pace of domestic consumption, officials indicated plans to encourage greater household spending on vehicles, electronics, and services.
