Industrial policies pave way for revitalizing Chinese economy

In the first half of 2025, China's economy has shown solid resilience and a gradual yet unmistakable recovery trend, anchored by a consumption revival, industrial upgrading and policy refinement.

Profits at China's major industrial firms contracted at a slower pace in June, reflecting the impact of government efforts to stimulate domestic demand. According to data released by the National Bureau of Statistics on Sunday, industrial enterprises with annual main business revenue of 20 million yuan ($2.78 million) or more recorded a total profit of 715.58 billion yuan in June, marking a year-on-year decline of 4.3 percent, an improvement over the 9.1 percent drop seen in May. For the first half of 2025, total profits stood at 3.44 trillion yuan, down 1.8 percent compared with the same period last year.

China's industrial sector is showing signs of gradual recovery. The slower pace of profit decline in June reflects a steady rise in corporate revenues. Targeted programs, such as large-scale equipment upgrades and trade-in deals for consumer goods, are beginning to yield tangible results. In June, the profits of medical instrument and device manufacturing enterprises rose 12.1 percent year-on-year, while the profits of manufacturers of unmanned aerial vehicles and home air conditioning units surged 160 percent and 21 percent, respectively.

It is estimated that continued government efforts to boost domestic demand and optimize market competition will further support the recovery of industrial profits.

Analysts believe that China has a relatively stable window of opportunity, where both economic fundamentals and public expectations are aligned for recovery. However, they also stress the need for policymakers to maintain momentum and be ready with additional policy tools to sustain growth.

Profit growth has remained in the negative territory for two consecutive months. The combination of adverse external conditions, sluggish elimination of inefficient capacity and prolonged producer price deflation continues to put pressure on business operations. Companies are still dealing with reduced pricing power and margin squeezes in several traditional industries.

The recent sharp rebound in commodity prices may accelerate inventory clearance in key upstream industries. As internal demand improves and industrial product prices show signs of bottoming out, a marginal improvement in profitability is expected.

With increased momentum from policies that promote consumption and stabilize investment, analysts anticipate that industrial profits will continue to recover in the third quarter. Sectors linked to equipment manufacturing and the exports supply chain, particularly automobiles and electronics, are expected to remain key growth drivers. However, longer-term uncertainties still loom, especially around the durability of domestic demand and the pace of anti-involution reforms. The weak real estate market and persistent global trade uncertainties may act as drags on the strength and consistency of the recovery trajectory.

Overall, the path to industrial recovery in China is unfolding gradually. But sustained improvement will depend not only on immediate stimulus, but also on how effectively the government navigates deeper structural reforms and fosters long-term demand resilience.

Looking ahead, the outlook for China's economy remains positive. Experts across sectors agree that the country's official growth target of around 5 percent is not only achievable, but potentially conservative, should current trends continue.