China’s industrial profits edge up in 2025, reversing three years of declines

China’s industrial profits rose 0.6% in 2025 from a year earlier, snapping three consecutive years of declines as officials moved to rein in aggressive price competition and companies sought overseas growth amid weak domestic demand.

The pace of growth accelerated from 0.1% in the January-to-November period, according to data from the National Bureau of Statistics.

The recovery last year was driven by policy intervention, particularly Beijing’s campaign against aggressive price undercutting, and companies’ efforts to expand overseas, said Tianchen Xu, a senior economist at the Economist Intelligence Unit.

Industrial profits climbed 5.3% in December from a year earlier, the strongest performance since September when earnings surged 21.6%. Profits had faltered in the prior two months, falling 5.5% in October and 13.1% in November.

In December, China’s factory activity returned to growth after eight straight months of contraction, in part thanks to pre-holiday stockpiling ahead of the Lunar New Year in February, an official at the statistics bureau said.

Profits at the country’s major industrial firms have been battered by the bruising price wars sweeping across several industries last year as sluggish consumer demands left companies grappling with excess capacity.

There is a “high level of divergence” across industries, said Lynn Song, chief Greater China economist at ING, adding that the overall profits growth remains tepid as price competition continues to erode margins.

For the entire 2025, mining sector profits plunged 26.2% from a year earlier, while profits in manufacturing and utilities, including electricity, heat, fuel and water, rose 5% and 9.4%, respectively, official data showed.

Among sectors that posted outsized gains, ferrous metal smelting and rolling processing firms saw profits surge 22.6%, while electronics manufacturing rose 19.5%. Coal mining and washing industry profits fell 41.8% and oil and gas extraction dropped 18.7%.

Profits at state-owned enterprises declined 3.9% while foreign-funded businesses, including those with investment from Hong Kong, Macau and Taiwan, recorded a 4.2% increase.

Yu Weining, chief statistician at NBS, attributed the modest rebound last year to the new growth drivers such as equipment and high-tech manufacturing. Railway, shipbuilding, aerospace, and electronics industries posted double-digit profit growth, Yu said.

Smart consumer electronics makers saw profits jump 48%, with unmanned aerial devices manufacturing and intelligent in-car appliance makers reporting gains of 102% and 88.8%, respectively. 

Yu, however, acknowledged that some industrial firms are still facing operational challenges, noting that “changes in the external environment” are increasingly important to profitability.

“Progress in Beijing’s ‘anti-involution’ push could gradually improve things, but it will take time,” ING’s Song said, referring to regulatory efforts launched last year to curb aggressive price cuts that have fueled excessive competition and deflationary pressure.

Beijing has taken some comfort from the headline economic growth last year that met the official target of 5%, helped by strong export growth as a one-year U.S.-China trade truce kept higher tariffs at bay.

Economists, however, called for further policy support to bolster domestic demand and broad economic growth. Retail sales grew 3.7% in 2025 from a year earlier, lagging behind the overall economic growth and a 5.9% expansion in industrial output.

At a press briefing on Monday, Yang Mu, an official at the Chinese Commerce Ministry, said Beijing will step up efforts to boost household spending on cars, home appliances, and electronic goods, while targeting consumption in the services sector.