China's Industrial Profits Rise Despite Tariffs

Despite facing steep U.S. tariffs of up to 145%, China’s industrial sector is showing strong signs of resilience. In April 2025, profits at major industrial enterprises increased by 3%, a noticeable improvement from 2.6% in March. According to the National Bureau of Statistics, overall profit growth for the first four months of the year stands at 1.4% year-on-year.

What’s Powering the Growth?

China’s industrial sector has found strength in strategic investments and domestic policy support, even as external trade tensions continue. Several factors have contributed to this surprising growth:

Key Growth Drivers

Recycling & Equipment Upgrade Programs: A nationwide initiative to recycle outdated machinery and upgrade equipment has stimulated fresh demand in the market.

Spike in Equipment Investment: Investment in industrial equipment has reached its highest level in four years, reflecting strong confidence among businesses.

Strong Contribution from Equipment Makers: Equipment manufacturers alone accounted for 0.9 percentage points of the total profit growth in April.

These developments highlight China’s push to modernize its manufacturing base while focusing on innovation and efficiency.

Sector-Wise Breakdown: Who’s Winning and Who’s Losing?

Different sectors of the economy have shown contrasting performance. While some industries are booming, others continue to struggle.

Sectors with Profit Growth:

Manufacturing Sector: Profits rose by a strong 8.6%, driven by rising domestic and export demand.

Semiconductor Industry: One of the biggest gainers, this sector saw profits more than double year-on-year as demand for chips surged.

Utilities: Posted a stable 4.4% profit increase, supported by consistent energy demand.

Sectors Facing Losses:

Mining Sector: Experienced a sharp 26.8% drop in profits, largely due to weak global commodity prices and oversupply issues.

Challenges Still Exist

Despite the positive signs, China’s industrial economy is not yet back to full strength. Several headwinds continue to limit broader recovery:

Profits Still ~20% Below 2021–2022 Levels: The sector is still recovering from the high-profit period before global disruptions began.

Rising Costs vs. Slower Income Growth: Operating income is rising, but not as fast as costs—putting pressure on profit margins.

Price Declines & Margin Pressure: Many industries are still experiencing falling prices for their goods, which hurts profitability.

These issues indicate that while growth is occurring, it is not without stress on companies’ bottom lines.

Beijing’s Response: A Strategic Shift

The Chinese government is not only managing short-term challenges but also preparing for the future. There’s a clear strategy in place to build long-term industrial strength.

Key Strategic Goals:

Enhance Technological Independence: China is pushing for greater self-reliance in critical technologies, especially in chips, AI, and green energy.

Stimulus to Build Global Champions: National programs are designed to support industries with global potential, such as advanced manufacturing and clean tech.

Policy Alignment for Private Firms: The government is encouraging private businesses to align with national interests by focusing on “core sectors” that support China’s long-term economic vision.

Official Statement:

> “China’s industry shows resilience and the ability to withstand external shocks,” said government officials, while also acknowledging the risks posed by rising global competition and economic uncertainty.

Final Take: Mixed Picture, but Resilience is Evident

China’s industrial economy is adapting quickly to a challenging global environment. Growth in high-tech and equipment sectors, along with government-led upgrades, is offsetting the impact of U.S. tariffs and global instability.

However, structural challenges remain—especially in older industries like mining and basic manufacturing. Continued support and reform will be essential for maintaining momentum.