China’s Industrial Profits Show Signs of Recovery in Q1 2025

China’s industrial sector has witnessed a modest yet significant recovery in the first quarter of 2025, marking a critical turnaround after a challenging year. According to official reports from the National Bureau of Statistics, industrial profits rose by 0.8% year-on-year, effectively reversing the -3.3% annual decline reported in 2024 and improving from an initial -0.3% trend seen in the first quarter of that year. This resurgence can be attributed to a combination of policy support and an uptick in domestic demand.

Manufacturing Sector Drives Growth

A standout contributor to this recovery has been the manufacturing sector, where profits surged by 7.6% year-on-year, notably accelerating from a 4.8% increase recorded in January and February. This sector’s performance is crucial, as it not only reflects the health of manufacturing companies but also acts as a bellwether for the broader economy.

Broad-Based Improvement in Various Industries

The positive trajectory in industrial profits is also seen in broader improvements across different sectors. A remarkable 24 out of 41 industrial sectors reported profit growth, representing nearly 60% of all categories assessed. This widespread expansion highlights a healthier industrial landscape and suggests that recovery is not just confined to a few leading sectors but is becoming a more collective phenomenon across the board.

Revenue Growth and Major Firms’ Performance

In conjunction with profit increases, major firms in the industry (those generating annual revenues of 20 million yuan or more) collectively reported a revenue growth of 3.4% year-on-year. This improvement marks an increase of 0.6 percentage points from January and February, reinforcing the notion that these substantial companies are beginning to regain their footing in a recovering market. Their total earnings reached a significant 1.51 trillion yuan (approximately $209 billion) in the first quarter of 2025.

Factors Contributing to Recovery

The rebound of China’s industrial profits can be largely attributed to incremental support measures implemented by the government aimed at boosting economic activity. Additionally, a revival in domestic consumer demand has played a key role in propelling industries forward. The combination of these factors has allowed industries to not only stabilize but also grow at a modest rate after facing challenges throughout the previous year.

This preliminary recovery represents the first quarterly growth for the industrial sector since Q3 2024 and may signal more promising developments ahead as China continues to navigate its post-pandemic economic landscape. As major firms leverage this growth, the overall health of the industrial sector could further strengthen, fostering optimism for future quarters.

In conclusion, the latest reports from China’s industrial sector indicate a cautious yet encouraging rebound, driven primarily by manufacturing growth and broad-based improvements across many industries. As discussed in this blog, the importance of strategic economic collaborations and the role of investment in these recoveries cannot be understated. Monitoring these developments will be essential for both investors and policymakers as they seek to understand the recovery’s pacing and potential complexities ahead.