Industrial profits back in black
China’s 2025 annual industrial profits grew for the first time in four years.
Per data released by the stats bureau (NBS) on January 27, industrial profits increased 0.6% in 2025, reversing three consecutive years of annual decline.
- On a monthly basis, profits rose 5.3% y/y in December, reversing November’s 13.1% drop.
On the surface this data looks solid – but don’t get too excited.
- 2025’s return to growth was entirely driven by base effects, and doesn’t signal a material improvement in corporate profits.
- Industrial profits are still below 2021 levels.
Meanwhile the ownership breakdown hardly screams broad-based industrial recovery:
- Profits at state-linked firms fell 3.9% y/y
- Profits across the private sector remained flat
- Only foreign enterprises saw growth – with industrial profits increasing 4.2% y/y
While December’s 5.3% growth rate was far more bullish, we place little weight on monthly industrial profit data.
- Industrial profits fluctuate wildly month-to-month due to seasonality, business investments, and the accounting methodology used to record them.
Get smart: Industrial profits are stabilizing at a low level, supported by export resilience and an incremental easing of China’s destructive price wars.
- This is margin repair at the bottom of the cycle, not a broad industrial rebound.
Get smarter: We expect producer price deflation to bottom out by late 2026, meaning industrial profit growth will pick up marginally later this year.
- That will provide a modest boost to business confidence, investment, and employment.
