China’s industrial profits showed a decline in the first two months of the current year, as enterprises in this Asian country are currently facing constant deflationary pressures and external factors such as increasing tensions in the global trade space.
Profits at major Chinese industrial companies in January-February 2025 fell by 0.3% compared to the result for the same period in 2024. The relevant information was published on Thursday, March 27, by the National Bureau of Statistics.
It is worth mentioning that in December, the mentioned profits increased by 11% year-on-year. This result interrupted the decline in the indicator, which had been observed for four months in a row. According to media reports, the December reading indicates that the measures to stimulate China’s economy, which Beijing, as a political center, announced in September, are having results. At the same time, the indicator for the first two months of 2025 indicates that either the mentioned measures were not effective enough in the context of a long-term outcome, or the situation in the Asian country’s economic system has changed in a relatively short period to such an extent that new challenges have emerged that require new decisions and actions.
Robin Xing, chief China economist at Morgan Stanley, said during a conversation with media representatives that the mood regarding the Asian country’s economy has improved. The mentioned Wall Street bank upgraded its forecast for China’s gross domestic product (GDP) growth in 2025. The financial institution expects the specified indicator to increase by 4.5% in the current year. The previous version of the forecast provided for the growth of the Asian country’s GDP by 4% in 2025.
At the same time, Robin Xing noted that it is still showing a mixed bag, and corporate profit is still lagging and consumer sentiment is still at subdued levels.
Profits of state-backed industrial companies in China grew by 2.1% in the first two months of 2025. Profits of firms with foreign investments in the Asian country increased by 4.9% over the mentioned period.
Profits in the manufacturing sector and utilities industry, including electricity, heat, gas, and water supply, grew by 4.8% and 13.5% respectively in the first two months of the current year. At the same time, profits in the mining industry fell by 25.2% over the specified period.
Yu Weining, a statistician at the National Statistics Bureau, said that the recorded decline in industrial profits is the result of the expansion of Beijing’s consumer goods trade-in and equipment upgrade policy. It was also noted that profitability in the relevant industries and enterprises in these supply chains has increased. Yu Weining warned that operating challenges still persist amid a more challenging external environment.
It is worth mentioning that the President of the United States, Donald Trump, imposed 20% additional tariffs on all goods imported from China. Also this week, he announced 25% levies on cars manufactured outside the US. These measures, which will take effect on April 2, will have an impact on the Chinese economy.
Beijing has set an ambitious economic growth target of about 5% for 2025. Analysts say that additional incentive measures are needed to achieve this goal, as China will have to compensate for the negative effect of tariffs from the United States.
Experts from many banks have recently revised their vision of the prospects of the Chinese economy, which is the second largest in the world, for 2025. In this context, they note green shoots in the Asian country’s economic system, but at the same time underline that headwinds related to US tariffs remain on the horizon.
HSBC economists predict that China’s GDP will grow by 4.8% in the current year. The previous version of their forecast stipulated that the mentioned indicator would increase by 4.5%. ANZ economists also expect the Asian country’s GDP to grow by 4.8% in 2025. The previous version of their projection provided a 4.3% increase in the mentioned indicator. Citi economists predict that China’s GDP will grow by 4.7% in 2025, following the previous rising estimate of 4.2%.
Robin Xing said that US tariffs against the Asian country may yet become higher and stickier. In this context, it was noted that Beijing will need to step up domestic stimulus as a countermeasure to external shocks.
As we have reported earlier, China Urges Global Business to Resist Protectionism.
