^{A textile factory on December 30, 2022 in Jiangxi Province. Chinese manufacturing activity contracted at its sharpest pace in nearly 3 years in December. | Vcg | Visual China Group | Getty Images}

China’s industrial sector showed fresh signs of stabilization in July as profits slipped just 1.5% year-on-year, marking the slowest pace of decline in five months. While the sector is still in contraction, the latest figures suggest that government measures to ease price wars and stabilize demand are beginning to take effect.

Broader Profit Trends

From January to July, total profits at major industrial firms fell 1.7% compared to the same period last year, according to the National Bureau of Statistics (NBS). This represents a notable improvement from steeper losses earlier in the year, when a combination of weak domestic demand, global economic uncertainty, and price competition weighed heavily on margins.

State-owned enterprises (SOEs) continued to face significant pressure, with profits down 7.5% in the first seven months of 2025. In contrast, foreign-invested companies reported a 1.8% increase in profits, underscoring stronger resilience from firms with global exposure. Private companies, while not specified in the July breakdown, have also been showing modest recovery momentum in recent months.

Sector-by-Sector Performance

The headline decline was largely driven by deep losses in mining, where profits plunged 31.6% year-on-year. Falling commodity prices and reduced global demand have hit miners hard, particularly in coal, metals, and energy-related resources.

On the other hand, manufacturing—the backbone of China’s economy—offered a silver lining. Profits in the sector grew by 4.8% in July, supported by stronger demand for electronics, automobiles, and high-end equipment. This rebound aligns with Beijing’s push to upgrade the country’s industrial base and reduce reliance on low-value exports.

Utilities also posted gains, with profits rising 3.9% year-on-year in July, reflecting stable consumption of electricity, water, and gas. This growth highlights a gradual normalization in domestic energy usage, which is often seen as a proxy for broader economic activity.

Policy Impact and Government Measures

According to Yu Weining, a senior statistician at the NBS, the narrower profit decline can be attributed to policy interventions aimed at stabilizing prices and boosting corporate margins. Over the past months, Beijing has intensified efforts to curb “irrational price competition” in industries such as electric vehicles and consumer electronics, where aggressive discounting had eroded profitability.

In addition, China has rolled out fiscal incentives, tax breaks, and credit support for struggling enterprises, particularly in manufacturing and technology. These measures are intended to sustain business investment and protect jobs as the economy continues its uneven recovery.

Broader Economic Context

The improvement in industrial profits comes at a critical moment for the Chinese economy, which has been grappling with slowing growth, a weak property sector, and subdued consumer confidence. Official data earlier this month showed industrial production grew 5.3% in July, slightly better than June’s 4.9%, suggesting that demand conditions are gradually improving.

Exports, however, remain under strain, falling for much of the year due to weak demand from Western markets. Analysts say domestic policy support will need to be paired with stronger external demand before profits can see a sustained turnaround.

Outlook Ahead

While July’s figures mark progress, challenges remain. The ongoing slump in mining underscores structural headwinds, while high debt levels among state-owned firms continue to weigh on financial health. Economists caution that without stronger consumer spending and export recovery, profitability improvements may remain uneven.

Still, the resilience shown by manufacturing and utilities signals that China’s industrial engine is regaining some momentum. If policy support continues and global conditions stabilize, analysts expect profits could return to positive growth in the coming months, offering a critical boost to the world’s second-largest economy.

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