China’s industrial profits dropped 9.1% in May 2025 compared to the same month last year. That is the sharpest monthly decline since October. The fall is not isolated. It is part of a broader contraction that has now stretched across multiple sectors and quarters. Beijing’s stimulus efforts are not catching. The engine is sputtering.
Cumulative profits for major industrial firms are down 1.1% for the first five months of the year. That includes factories, utilities, and mining operations. The mining sector alone saw a 29% collapse in profits. Automotive manufacturing dropped 11.9%. State-owned enterprises posted a 7.4% decline. Non-state firms fell 1.5%. The only group that managed to stay above water was foreign-invested firms, which eked out a 0.3% gain.
🚨🇨🇳 *China’s Industrial Profits Plunge 9.1%, Steepest Fall In Seven Months
China's economy is collapsing. pic.twitter.com/xZK2j88Jjg
— Jesse Cohen (@JesseCohenInv) June 27, 2025
The price war is real. Companies are slashing margins to hold market share. That is not strategy. That is survival. Domestic demand is weak. Industrial product prices are falling. The National Bureau of Statistics pointed to both as the primary drivers behind the May plunge. The deflationary pressure is not easing. It is spreading.
Retail sales rose 6.4% in May, the fastest pace since late 2023. But that growth came from subsidies and discounts. Not from confidence. Not from wage growth. Not from organic demand. The foot traffic is up. The receipts are not. Businesses are moving volume at the expense of profit. That is not recovery. That is erosion.
The property sector remains frozen. Local governments are buried under debt. The private sector is bleeding. Nearly one in four private firms is now operating at a loss. That is up from under 10% a decade ago. The overcapacity problem is not theoretical. It is visible in steel, solar, autos, and semiconductors. Factories are producing more than the market can absorb. Prices are falling. Inventories are rising. Profits are vanishing.
Exports are holding, but only just. May shipments rose 4.8% year over year. But exports to the United States dropped 34.5%. The gap is being filled by Southeast Asia and the EU. That is not a stable trade base. That is a patch job.
GDP growth is tracking at 5.2% for the first half of the year. That is above Beijing’s official target. But it is not translating into earnings. The disconnect between output and profit is widening. That is not sustainable. That is a warning.
The Politburo meets in July. More stimulus is on the table. But the appetite is fading. The debt load is heavy. The tools are blunt. The confidence is low. The market is watching. The numbers are speaking.
Sources
https://www.cnbc.com/2025/06/27/china-industrial-profits-plunge-9point1percent-in-may.html
https://www.allaroundworlds.com/china-industrial-profits-drop-may-2025/
https://www.newsweek.com/chinas-economy-deep-trouble-opinion-2037177