China’s industrial profits experienced growth in the first quarter, as reported by official data on Sunday, but challenges from the ongoing trade conflict with the United States are expected to continue affecting the sector.
Amid U.S. tariffs that threaten China’s key export industries and with no clear timeline for trade negotiations, analysts and investors are awaiting further actions from the Chinese government to cushion the economic impact.
According to data from the National Bureau of Statistics (NBS), industrial profits for Chinese companies increased by 0.8% to 1.5 trillion yuan ($205.86 billion) in the first quarter, a rebound from the 0.3% decline seen in the first two months of the year. In March alone, profits grew by 2.6% year-on-year.
This profit growth marks a turnaround after a 3.3% decline in 2024, breaking the trend of consecutive profit losses that began in the third quarter of the previous year. Yu Weining, an NBS statistician, highlighted that the improvement was driven by a consumer goods trade-in initiative, with notable profits in the wearable smart device and household appliance sectors, which saw increases of 78.8% and 21.7%, respectively.
Despite the positive quarterly results, China’s economy still faces deflationary pressures, which are impacting corporate earnings and workers’ wages. Businesses are grappling with rising trade disruptions, while trade tensions with the U.S. add uncertainty.
Yu acknowledged that the external environment is becoming more complicated and unstable, noting that the government plans to strengthen policy measures to improve profitability for businesses.
In light of Washington’s aggressive trade policies, Beijing has encouraged exporters to focus on domestic markets as an alternative to the U.S., which has imposed tariffs up to 145% on Chinese imports. However, many export-oriented factories are struggling with weak domestic demand, price wars, low profit margins, and payment delays.
The Politburo, China’s decision-making body, announced on Friday that it would provide greater support to businesses and workers affected by the U.S. tariffs. New monetary and policy financing measures will also be introduced to stimulate innovation, consumption, and foreign trade.
The data also revealed varied performance across sectors. State-owned enterprises saw a 1.4% decrease in profits, while private-sector companies experienced a slight 0.3% dip. Foreign firms, however, recorded a 2.8% profit increase.
The NBS figures reflect industrial firms with annual revenue of at least 20 million yuan from their core operations. With the ongoing trade war continuing to strain China’s economy, the government faces mounting pressure to implement further measures to support businesses in navigating these challenging conditions.
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