China’s industrial profits unexpectedly fall in ominous sign for economy

Economists had predicted China’s industrial firms would record robust profit growth in the first two months of the year

Reading Time:1 minute

China’s industrial firms recorded an unexpected fall in profits during the first two months of the year, in a sign that the country’s economic recovery is fragile. Photo: AP

Published: 10:55am, 27 Mar 2025

Profits at China’s industrial firms contracted at the start of 2025, flashing a worrying sign for the economy as higher US tariffs loom.

Industrial profits fell 0.3 per cent in the first two months compared to the same period last year, according to data released on Thursday by the National Bureau of Statistics. The decline showed an earnings rebound in December was short-lived.

Bloomberg Economics had forecast an increase of 9 per cent year on year in the January-February period.

The setback in corporate finances suggests the recovery in the world’s second-largest economy this year is fragile. A turnaround in profits is essential to lifting business confidence and encouraging companies to invest and hire.

That does not bode well for Beijing’s efforts to boost domestic demand this year, as rising tariffs threaten to dent the country’s exports. Overseas shipments contributed to nearly a third of China’s growth last year.

Deflationary risks persist as factory-gate prices continue to drop, squeezing the profit margins of industrial firms. More headwinds lie ahead as US President Donald Trump’s trade war is set to hurt foreign demand for Chinese goods, adding pressure to corporations’ bottom lines.