BEIJING—China’s major industrial enterprises experienced a significant turnaround in profitability in the first quarter of 2025, according to official data released Sunday.profits of enterprises above the designated size rebounded from a 3.3 percent year-on-year decline in 2024 to a 0.8 percent increase, signaling a potential shift in the country’s economic trajectory.

the National Bureau of Statistics (NBS) data indicated that in march alone, profits shifted from a 0.3 percent decline in January-February to a 2.6 percent rise,”signaling a notable advancement.” This recovery is attributed to a combination of effective macroeconomic policies and strong performances in key sectors like equipment manufacturing and high-tech industries.

NBS statistician Yu Weining noted that despite “a more complex and challenging external habitat with rising uncertainties, China’s macroeconomic policies have proven effective since the start of the year. New and existing policies have worked together to give the industrial economy a strong start.” Weining emphasized that “coordinated policy measures as well as the equipment manufacturing and high-tech manufacturing sectors played a crucial role in driving this positive shift, bolstering the overall quality and efficiency of industrial advancement.”

The operating income of industrial enterprises above the designated size rose by 3.4 percent year-on-year in the first quarter, with the growth rate accelerating by 0.6 percentage points compared to the first two months. In March,revenue growth reached 4.2 percent, 1.4 percentage points higher than in the first two months, according to the NBS.

Nearly 60 percent of sectors experienced profit increases during this period. Out of 41 major industrial sectors, 24 industries saw year-on-year profit growth, and 24 industries saw an acceleration in profit growth, a narrowing of decline, or a shift from loss to profit.The manufacturing sector, in particular, saw its profit grow by 7.6 percent in the first quarter.

Key Sectors Driving Growth

The equipment manufacturing industry emerged as a crucial profit driver in the first quarter, experiencing a growth of 6.4 percent year-on-year, 1 percentage point faster than in the January-February period. It contributed to overall industrial profit growth by 2 percentage points,up 0.6 percentage points from January to February, according to the NBS.

High-tech manufacturing also spearheaded industrial quality growth, reversing a 5.8 percent decline in January-February to post a 3.5 percent profit growth in the first quarter, 2.7 percentage points above the overall average,according to the NBS. In March, it surged 14.3 percent, contributing 2.8 percentage points to monthly industrial profit growth.

Specific sub-sectors within high-tech manufacturing showed impressive gains. Aerospace manufacturing profits rose 23.9 percent, while artificial intelligence-related sectors, including smart consumer devices, specialized equipment for the electronics industry, and electronic devices and medical devices also posted strong gains, the NBS said.

Expert Commentary and Policy impact

Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences, stated that “the industrial profit growth signals improved industrial profitability and strong economic recovery momentum, and this helps stabilize market expectations, boost market confidence, and provide strong support for the sustained and healthy development of the economy.”

According to Peng,”the development of the equipment manufacturing and high-tech manufacturing industries contributes to the optimization and upgrading of the industrial structure,improving the quality and efficiency of the economy.”

Peng added: “as an important pillar of the industrial economy, the development of the equipment manufacturing industry not only enhances the overall level of China’s industrial manufacturing but also provides strong support and guarantees for the development of other industries. Moreover, the development of high-tech manufacturing promotes the high-end, bright and green development of the manufacturing industry, while facilitating the cultivation and growth of emerging industries, injecting new vitality into economic growth.”

China’s equipment renewal and consumer goods trade-in policies have substantially boosted industrial profits in the first quarter, according to the NBS. Large-scale equipment renewal policies spurred 14.2 percent and 9.5 percent year-on-year profit growth in the special and general equipment sectors. The expanded consumer goods trade-in policy drove 78.8 percent profit growth in wearable devices, 65.8 percent in scooters,and 21.7 percent in kitchen appliances, the NBS data showed.

According to this year’s Government Work Report,”1.3 trillion yuan ($180.31 billion) of ultra-long special treasury bonds will be issued, 300 billion yuan more than in 2024, while 500 billion yuan of special treasury bonds will be issued to support large state-owned commercial banks in replenishing capital,” according to the Xinhua News agency.

These ultra-long special treasury bonds “will facilitate the implementation of major national strategies and enhance security capacity in key areas, as well as support a new round of large-scale equipment upgrades and consumer goods trade-in programs.”

Counterarguments and Considerations

While the rebound in industrial profits is encouraging, some analysts remain cautious. Concerns persist regarding the sustainability of this growth, given the ongoing global economic uncertainties and potential trade tensions. Some argue that the growth is primarily driven by government stimulus and may not reflect genuine underlying demand. However, Chinese officials maintain that the focus on high-tech and advanced manufacturing will create long-term, lasting growth.

FAQ: China’s industrial Profit Rebound

What caused the rebound in China’s industrial profits in Q1 2025?

The rebound is attributed to effective macroeconomic policies,strong performance in equipment manufacturing and high-tech industries,and government stimulus programs like equipment renewal and consumer goods trade-ins.

Which sectors saw the most significant profit growth?

Equipment manufacturing and high-tech manufacturing, especially aerospace and AI-related sectors, experienced substantial profit growth.

What policies are supporting this industrial growth?

Government policies include the issuance of ultra-long special treasury bonds to support equipment upgrades and consumer goods trade-in programs.

Is this growth sustainable?

Some analysts are cautious, citing global economic uncertainties.However, Chinese officials emphasize the shift towards high-tech and advanced manufacturing for long-term sustainability.

How do these results affect the U.S. economy?

These results can affect the U.S. economy through global trade and competition. It may impact the demand for US goods and services, and affect the competitiveness of US companies in global markets.