(Jan 27): China’s industrial enterprises had their first annual gain in profits since 2021, as producer deflation showed signs of easing in the wake of government efforts to curb excess competition and cut capacity.
Profits climbed 5.3% last month from a year earlier, compared with a plunge of more than 13% in November. For the full year, they eked out an increase of 0.6%, according to data released on Tuesday by the National Bureau of Statistics (NBS).
Equipment manufacturing was the biggest driver behind the turnaround in profitability, according to the NBS, accounting for nearly 40% of overall earnings in 2025 — up nearly three percentage points from a year ago. High-tech manufacturing also “injected strong momentum into the high-quality development of industry”, it said in a statement accompanying the data release.
Profit margins have been under pressure in recent years as domestic demand sagged. The world’s second-largest economy lost more momentum last quarter, even as industrial production held up well thanks to booming exports.
Industrial earnings provide a key measure of the financial health of factories, mines and utilities that can affect their investment decisions in the months to come.
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China’s industry, which is dominated by manufacturing, has suffered from domestic deflation that’s eating away at income and profits. Producer prices have declined every month for more than three years but had their smallest decrease in over a year in December.
Deflationary pressures have been present since the end of the pandemic as a consequence of a prolonged slump in housing and weak consumer demand. A glut of production capacity in some industries has also led to oversupply, pushing firms to cut prices to survive.
In carmaking, profits rose only 0.6% last year. A number of traditional manufacturing sectors also struggled, with earnings in the clothing industry plunging 27% in 2025 from a year ago and down 12% among furniture makers.
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The biggest improvements were concentrated in some upstream sectors like the processing and refining of ferrous metals, which surged 300% for the year.
Companies such as carmakers also faced government scrutiny over their mounting bills owed to suppliers. But NBS data showed that the time it took for private firms to collect account receivables climbed again to more than 70 days for December, a record high for that month.
Foreign firms were the only ones that saw an increase in profits, with a 4.2% gain in 2025. State-owned enterprises recorded a 3.9% fall while private companies’ profits were unchanged from a year ago.
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