China's industrial profits tumble at fastest pace in over a year

Highlights:

• Industrial profits fell 13.1% in November, the biggest drop in 14 months
• Automotive and high-tech sectors show profit growth
• Weak domestic demand offsets strong exports, no new stimulus introduced

Profits at China's industrial firms in November fell at their fastest pace in over a year, as weak domestic demand offset resilience in exports, in another sign of a stuttering economic recovery that backs calls for additional policy stimulus.

Profits fell 13.1% year-on-year in November, accelerating from a 5.5% drop in October, according to the National Bureau of Statistics (NBS) data released today (27 December). The sharper decline came despite better-than-expected goods exports and against a backdrop of persistent factory-gate deflation, maintaining pressure on policymakers to do more to address chronically soft household consumption.

The profit numbers are consistent with a broader cooling in economic activity in the fourth quarter, mainly due to the drag from soft domestic demand, said Xu Tianchen, senior economist at the Economist Intelligence Unit.

Xu said he remained cautiously optimistic about the outlook for industrial profits.

"Profitability will improve under 'anti-involution'" as firms scale back investment over time, he said, adding that companies could also "earn more profits overseas," albeit "at the cost of their global peers."

For the first 11 months of the year, industrial profits rose 0.1% from a year earlier, slowing from 1.9% growth in January–October, driven in part by a 47.3% plunge in profits at the coal mining and washing industry.

Momentum in the roughly $19 trillion economy eased toward year-end, though authorities have yet to roll out new policy support.

China observers say Beijing is taking some comfort from indicators suggesting that the official 2025 growth target of around 5% is still achievable, while a US-China trade truce has also helped ease tensions. However, market expectations centre on the need for further policy support next year to bolster domestic demand and broad economic growth.

Against a volatile and uncertain global backdrop, and amid continued structural adjustment as industry shifts from old to new growth drivers, the recovery in industrial firms' profitability still needs to be put on a firmer footing, NBS Chief Statistician Yu Weining said in an accompanying statement.

China's economy grew by just 2.5% to 3% in 2025, the Rhodium Group think tank estimates, roughly half the pace implied by official data, driven by a collapse in fixed-asset investment over the second half of the year.

By sector, the automotive industry reported a 7.5% rise in profits, accelerating by 3.1 percentage points from the January–October period. High-tech manufacturing was another bright spot, with profits up 10.0% year-on-year, an improvement of 2.0 percentage points from January–October, according to the NBS.

At an agenda-setting meeting earlier this month, policymakers pledged to maintain a "proactive" fiscal policy next year to support both consumption and investment.

The government has also repeatedly promised to bolster employment, lift household consumption, revive prices and stabilise the property market, which has remained in a prolonged slump.

Industrial profit figures cover firms with annual revenue of at least 20 million yuan ($2.85 million) from their main operations.

($1 = 7.0063 Chinese yuan renminbi)