Chinese manufacturing sector shows resilience as China’s industrial profits increase amid challenging global trade environment. This analysis examines the factors behind this unexpected economic turnaround.
China’s industrial profits grew in the first quarter
According to the National Bureau of Statistics (NBS), industrial profits increased by 0.8% year-on-year to 1.5 trillion yuan ($205.86 billion) during Q1 2025. This positive reversal in China’s industrial profits marks a decisive turnaround from the 0.3% decline recorded in January-February. And also the more substantial 3.3% contraction experienced throughout 2024.
The March figure showed profits rising 2.6% year-on-year, officially ending a streak of profit declines that had lasted since the third quarter of 2024. This recovery is seen as a key indicator of economic resilience.
Some sectors recorded outstanding results:
- The wearable smart device industry saw profits jump 78.8%.
- Kitchen appliance makers recorded a 21.7% profit increase.
- These gains in China’s industrial profits were largely attributed to successful government consumer trade-in programs.
Analysis by ownership structure reveals fascinating patterns. While foreign-owned enterprises achieved a 2.8% growth in profits, state-owned entities experienced a 1.4% decline, and private-sector companies saw a modest 0.3% reduction during the same period.
China’s actions to sustain the growth of China’s industrial profits
Beijing has rolled out a comprehensive strategy to protect manufacturing profitability, despite the US raising tariffs on Chinese exports by as much as 145%. These coordinated policy initiatives aim to protect industrial performance while opening up new growth avenues.
The Communist Party’s Politburo recently announced targeted interventions to maintain economic stability through:
- Direct support mechanisms for enterprises hit hard by US tariffs.
- New monetary tools specifically engineered to stabilize China’s industrial profits.
- Specialized financing instruments to boost innovation and enhance competitiveness.
- Strategic programs to strengthen domestic consumption.
- Development of alternative export channels to offset trade disruptions.
Chinese policymakers have also actively encouraged export-dependent manufacturers to shift to the domestic market. However, this transition faces major challenges, including fierce domestic competition, compressed margins, payment reliability concerns, and currently insufficient domestic demand.
NBS statistician Yu Weining acknowledged these complexities affecting China’s industrial profits, stating: “The external environment is becoming more complex and severe, and unstable and uncertain factors are increasing.” Government officials have pledged to step up policy implementation to improve profitability across the industry.
These support measures helped China’s economy perform better than expected in the first quarter, boosted by stimulus measures to stimulate consumption and investment. Nevertheless, persistent deflationary pressures continue to challenge corporate profits and impact worker compensation throughout manufacturing supply chains.
As international trade tensions persist with no scheduled bilateral negotiations with Washington, maintaining the growth trajectory of China’s industrial profits will require ongoing policy innovation and strategic economic adaptation throughout 2025 and beyond.
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