China’s Industrial Profits Surge 21.6% in September, Largest Increase in Nearly Two Years

China’s Industrial Profits Surge 21.6% in September, Largest Increase in Nearly Two Years

China’s industrial profits soared 21.6% year-on-year in September, according to the National Bureau of Statistics (NBS). This represents the biggest jump since November 2023 and continues a strong rebound that began in August, when profits increased by 20.4%.

For the first nine months of 2025, profits at major industrial firms expanded by 3.2%, accelerating from a 0.9% increase recorded between January and August, signaling improving corporate earnings despite a challenging economic backdrop.

Key Drivers Behind Profit Growth

The rebound in industrial profits was largely attributed to Beijing’s targeted policies aimed at curbing intense price competition within sectors, easing pressure on manufacturers amid persistent deflation in producer prices, which has now extended into its third year.

China’s consumer prices fell 0.3% in September year-on-year, exceeding expectations, while the producer price index (PPI) declined 2.3%, underscoring ongoing deflationary pressures in the supply chain.

Sector Performance Highlights

• Manufacturing sector profits increased 9.9% year-on-year in the first nine months.
• Electricity, heat, fuel, and water supply companies recorded a 10.3% rise in earnings.
• The mining sector experienced a significant profit decline of 29.3%.
• High-tech manufacturing was a major growth engine, with profits surging 26.8% in September.
• State-owned enterprises saw a slight profit dip of 0.3%, while foreign-invested firms and private companies posted gains of 4.9% and 5.1%, respectively.

Broader Economic Context

Chinese manufacturers continue to navigate uncertain U.S. trade policies and subdued domestic consumer sentiment. The economy faces headwinds from a prolonged housing market downturn, weak labor market conditions, and increasing export challenges.

While export volumes have remained relatively resilient throughout 2025, analysts anticipate slower growth in the final quarter, influenced by a high comparative base from last year and escalating global trade barriers.

“We expect export growth to slow in Q4, after an increase to 6.6% year-on-year in Q3 from 6.2% in Q2, due to a high base and rising trade barriers globally,” said economists at Nomura.

China’s GDP expanded by 4.8% in Q3 2025, marking the slowest pace in a year. Fixed-asset investment contracted unexpectedly by 0.5% in the first nine months, the first decline since the pandemic year of 2020.

Industrial output growth accelerated to 6.5% year-on-year in September, up from 5.2% in August, reflecting ongoing strength in manufacturing activity.

These resilient industrial indicators suggest that Chinese policymakers may not feel compelled to implement additional stimulus measures to meet the government’s growth target of approximately 5% for 2025.

At a recent high-level economic planning meeting, officials emphasized the importance of boosting domestic demand and upgrading industrial capabilities through technological innovation, although large-scale consumption stimulus appears unlikely in the near term.

“References to ‘expanding domestic demand’ and ‘improving livelihoods’ are present but comparatively much less prominent,” noted Louise Loo, head of Asia Economics at Oxford Economics. “This suggests policymakers recognize weak household sentiment but do not foresee large-scale consumption stimulus over the next five years.”

FinOracleAI — Market View

China’s industrial profit surge in September signals a noteworthy recovery in corporate earnings, driven primarily by high-tech manufacturing and government efforts to stabilize prices. Despite headwinds from trade tensions and subdued domestic demand, the manufacturing sector’s resilience supports cautious optimism for the near-term economic outlook.

• Opportunities: Continued expansion in high-tech manufacturing may drive broader industrial upgrades and productivity gains.
• Opportunities: Government policies to moderate price competition could sustain profit margins across sectors.
• Risks: Persistent deflationary pressures and weak consumer demand may limit domestic growth momentum.
• Risks: Escalating global trade barriers and U.S.-China tensions could dampen export growth moving forward.

Impact: The strong rebound in industrial profits combined with robust output growth suggests a cautiously positive market sentiment, although structural challenges remain. Investors should monitor evolving trade dynamics and domestic consumption trends closely.