China's industrial profits saw a significant turnaround in 2025, marking the first increase in four years. This positive development comes as a result of the government's efforts to curb price wars and excessive competition, which had been putting pressure on corporate earnings. The $19 trillion economy, however, still faces challenges, with sectors like autos and solar panels experiencing profit margin squeezes in their pursuit of market dominance. Despite this, an export boom has helped to balance weak domestic consumption.
The National Bureau of Statistics (NBS) reported a 0.6% rise in profit for industrial firms in 2025, a stark contrast to the 0.1% increase recorded in the previous 11 months. December alone saw a remarkable 5.3% profit increase year-over-year, reversing a 13.1% decline in November. This positive trend is attributed to the diversification of exports away from the U.S., which has mitigated the impact of tariffs imposed by former President Donald Trump.
The auto industry, in particular, benefited from strong exports, ending the year with a 0.6% profit increase, reversing an 8% decline from the previous year. However, the NBS's Yu Weining warned of ongoing challenges in industrial transformation and upgrading, with some firms still facing difficulties in production and operation. Policymakers are focusing on boosting consumption in the services sector to encourage the purchase of industrial output, addressing over-capacity and reducing reliance on foreign demand.
The data also revealed a mixed performance among different types of firms. State-owned industrial firms experienced a 3.9% profit decline, while privately run firms maintained flat profits. Foreign firms, however, recorded a 4.2% profit gain. These figures are based on companies with annual revenues of at least 20 million yuan ($2.88 million) from their main operations.
