China industrial profits ease drop with crackdown on price wars

BEIJING – China’s industrial companies saw their profits fall at a slower pace in July, in a potential sign that efforts to curb overcapacity are starting to ease the strain from aggressive competition among producers.

Industrial profits declined 1.5 per cent in July from a year earlier, falling the least since they began shrinking in May, according to data released on Aug 27 by the National Bureau of Statistics. For the first seven months of 2025, earnings contracted 1.7 per cent.

Profits climbed much faster in the manufacturing sector, growing 6.8 per cent in July from a year ago after a gain of 1.4 per cent in June, statistician Yu Weining said in a separate statement accompanying the data release. Producers of raw materials, steelmakers and petroleum refiners moved from losses into profits in the month.

“Policy measures to promote a reasonable rebound in prices were gradually implemented, driving corporate profitability to recover continuously,” Ms Yu said.

Profit margins are still under pressure after domestic demand softened further, even as a government-led campaign to curb excess competition begins to translate into better earnings. The world’s second-largest economy weakened across the board in July, with consumer inflation slipping to zero while retail sale growth cooled.

Factory-gate prices have declined for 34 consecutive months, pointing to entrenched deflation that could hold businesses and households back from spending and act as a drag on corporate bottom lines.

While overseas shipments to non-US markets more than compensated for a drop in orders from America, a gauge of China’s new export orders fell at the quickest pace in three months, boding ill for foreign demand in the coming months.

Industrial earnings are a vital gauge of the financial health of factories, mines and utilities, shaping their investment decisions in the months to come. 

Profits in the mining sector kept dropping, with a decrease of almost 32 per cent year on year for the first seven months. Coal miners and washers remained among the worst-hit, given a supply glut in their industry.

Manufacturers saw earnings rise during the January-July period, as some continue to benefit from state subsidies that encourage companies and consumers to replace old equipment and home goods with new ones.

Profits in high-tech manufacturing surged 19 per cent in July from a year ago, Ms Yu said, citing advancements in aerospace equipment and semiconductors. BLOOMBERG