A worker checks a finished vehicle on the production line for electric vehicle maker Zeekr at its factory on May 29, 2025 in Ningbo, China.
Kevin Frayer | Getty Images News | Getty Images
China’s industrial profits plunged 9.1% in May from a year earlier, in the latest sign that Beijing’s stimulus efforts are falling short in boosting enterprises’ profitability.
That marked the largest monthly decline since October last year, when the industrial profits dropped 10%. Industrial profits are a key measure of the financial health of factories, mines and utilities in China.
Cumulative profits at major industrial firms fell 1.1% in the first five months of 2025, compared to a year earlier, the data showed.
In September last year, industrial profits recorded an eye-watering 27.1% year-on-year drop, leading Beijing to ramp up stimulus in its bid to reverse the slump in corporate earnings.
The data followed a mixed bag of economic data out of China last month. China’s retail sales grew at their fastest rate since late 2023 in May, rising 6.4% from a year ago, as government subsidies helped boost consumption, while industrial output and fixed-asset investment both missed expectations.
Economists had suggested that Chinese authorities may withhold additional stimulus firepower until signs of deeper economic stress emerge.
Robin Xing, chief China economist at Morgan Stanley, said in a note Friday that China’s gross-domestic-product growth is tracking at 5%, taking the GDP in the first half of the year to 5.2%, above Beijing’s official target of 5%. That could reduce the urgency for Beijing to step up stimulus at the upcoming Politburo meeting in July, Xing added.
The growth is likely to soften in the second half of the year, Xing cautioned, citing persistent deflationary pressure, payback of front-loaded exports and tariff impacts on its direct exports to the U.S.
Citibank earlier this week upgraded China’s growth forecast for 2025 to 5% from 4.7%, in line with Beijing’s official target, boosted by robust growth in the first half of the year and expectations for resilient exports.
China’s exports this year have held up despite the erratic U.S. tariff policy, thanks to a surge in shipments to Southeast Asia and European Union countries. In May, the country’s exports rose 4.8% from a year earlier, even as the U.S.-bound shipment plunged 34.5% from a year ago.
Citi expects the country’s overall exports to grow a decent 2.3%, while factoring in an estimated 10% decline in shipments to the U.S.
U.S. President Donald Trump said Wednesday that a deal with China had been signed, without providing additional details. A White House official later clarified that “the administration and China agreed to an additional understanding of a framework to implement the Geneva agreement.”
The Geneva deal had faltered over China’s curbs on critical mineral exports and the U.S. tightening restrictions on tech and Chinese student visas.
Both sides later agreed to a 90‑day pause on May 12, which entailed rolling back some U.S. tariffs and China’s export restraints on critical minerals.