China's industrial profits plummeted 9.1% in May from a year earlier, marking the steepest monthly decline in seven months as factories grappled with weak demand and the lingering effects of U.S. trade tariffs. The sharp reversal erased gains from earlier in the year and underscored the fragility of the world's second-largest economy amid persistent deflationary pressures.
The May decline, reported Friday by China's National Bureau of Statistics, represented a dramatic swing from April's 3.0% profit growth. For the first five months of 2025, cumulative profits at major industrial firms fell 1.1% compared to the same period last year, reversing a 1.4% increase recorded through April.
The profit collapse coincided with heightened trade tensions between Beijing and Washington. Heavy tariffs imposed by the U.S. on Chinese goods since April led to suspended factory production until late May, when the two countries reached a temporary truce12.
Yu Weining, a statistician with the National Bureau of Statistics, attributed the decline to "insufficient effective demand, declining prices of industrial products and fluctuations in short-term factors"13. The data covers firms with annual revenue of at least 20 million yuan ($2.78 million) from their main operations34.
Despite the overall downturn, China's exports held steady thanks to surging shipments to Southeast Asia and European Union countries, even as U.S.-bound exports plunged 34.5% in May5.
The profit decline varied significantly across ownership types and industries. State-owned firms saw profits drop 7.4% in the first five months, while private companies managed a modest 0.3% increase and foreign firms posted a 3.4% rise12.
Some sectors bucked the downward trend. Profits in China's aerospace, aviation and marine industries soared 56% year-over-year, driven by the country's manned lunar exploration program and the rollout of domestically produced commercial aircraft34. Industries covered by Beijing's consumer goods trade-in program, including home appliances and kitchenware, also performed well34.
The industrial profit figures come as economists debate whether Beijing will deploy additional stimulus measures. Morgan Stanley's chief China economist Robin Xing noted that GDP growth is tracking at 5%, potentially reducing urgency for more aggressive intervention at the upcoming Politburo meeting in July5.
The auto sector faces particular strain, with local dealers appealing for manufacturers to end destructive price wars that are damaging cash flow and forcing some dealerships to close12.
