BEIJING- China’s industrial profits slipped in the first two months of 2025, signaling a challenging period ahead for businesses as they navigate persistent deflationary forces and an escalating trade war with the United States.
The economy got off to an uneven start this year, as retail sales growth accelerated while consumer and producer prices contracted and exports remained sluggish, maintaining pressure on policymakers to ramp up stimulus.
Industrial profits fell 0.3 percent in the January-February period from the same period last year, according to data released by the National Bureau of Statistics (NBS). This compared with an 11 percent increase in earnings in December.
China combines the profits data for January and February to smooth out the impact of the week-long Lunar New Year holiday, the timing for which changes each year.
Highlighting a tortuous post-COVID recovery, industrial profits slid 3.3 percent for the whole of 2024, the third straight year of contraction.
Worryingly, the pressure on business shows no signs of letting up this year, and the US tariffs appear to have driven retailers in the world’s biggest economy to seek price cuts from Chinese suppliers.
“The external environment has become more complex and severe with an increase in unstable and uncertain factors, and some industrial enterprises are still facing a lot of difficulties in their production and operation,” said NBS statistician Yu Weining.
The comments underscore the mounting headwinds at home and abroad.
US President Donald Trump’s tariff blitz against trading partners, including China, has rattled financial markets and raised fears of a sharp global economic downturn.
“The escalation of tariffs this year could exacerbate what is already heavy cost competition amid overcapacity concerns,” said Lynn Song, ING’s chief economist for Greater China.
“As such, much of the onus remains on policy support to boost domestic demand this year to help offset this drag.”
While a few firms such as local electric vehicle champion posted record profits last year, many businesses were struggling to stay afloat.
