Foreign industrial enterprises operating on the Chinese mainland recorded a notable profit recovery in 2025, marking the first year of growth after three consecutive years of contraction. The rebound highlights renewed momentum in China’s industrial sector and a gradual return of confidence among foreign investors, according to official data released on Tuesday.
Data from the National Bureau of Statistics (NBS) shows that foreign-funded industrial enterprises — including those from Hong Kong, Macao, and Taiwan — generated total profits of 1.74 trillion yuan (approximately USD 250 billion) in 2025, representing a 4.2% year-on-year increase.
This turnaround follows profit declines of 1.7% in 2024, 6.7% in 2023, and 9.5% in 2022, reflecting a broader recovery trend across China’s industrial economy.
Industrial Profits Turn Positive After Three Years
The recovery was not limited to foreign-funded companies. In 2025, industrial enterprises above a designated size nationwide recorded total profits of 7.3982 trillion yuan, up 0.6% year-on-year, officially ending a three-year period of declining profitability.
Experts noted that the industrial sector has likely moved past its cyclical low and is entering a phase characterized by higher-quality growth and improved operational efficiency, laying a stronger foundation for continued recovery in 2026.
High-Tech Manufacturing Drives Growth
According to Liu Chunsheng, associate professor at the Central University of Finance and Economics, the rebound in foreign industrial profits reflects China’s continued appeal in advanced manufacturing, high-tech industries, and new energy supply chains, alongside the benefits of sustained opening-up policies.
Official data shows that profits in several high-tech manufacturing segments surged dramatically in 2025. Industries such as intelligent unmanned aerial vehicle manufacturing, integrated circuits, and semiconductor equipment production all reported profit growth exceeding 100% year-on-year.
Policy guidance encouraging foreign investment into central and western regions and technology-intensive sectors has also helped improve China’s industrial investment structure.
Demand and Supply Improvements Boost Profits
Analysts attribute the overall profit turnaround to both demand-side and supply-side factors. On the demand side, trade-in programs, steady domestic consumption, and resilient exports helped support industrial output. On the supply side, growth in high-tech industries, efforts to curb excessive price competition, and a relatively low comparison base in 2024 all contributed to improved profitability.
Foreign Confidence and New Investments Rise
The improving quality of China’s industrial development is attracting renewed foreign investment. Covestro AG, a German manufacturer of polymers and high-performance plastics, recently began operations at its thermoplastic polyurethane production facility in Zhuhai, Guangdong, and has confirmed plans to further expand its investment in China.
“For multinational companies, China’s innovation ecosystem has become an increasingly powerful investment magnet,” said Monique Buch, Covestro’s chief commercial officer.
2026 Outlook: Recovery with Ongoing Risks
Looking ahead, Wen Bin, chief economist at China Minsheng Bank, expects industrial profits to continue recovering in 2026, supported by stable consumption, improving investment sentiment, and resilient exports, as well as ongoing measures to prevent destructive price competition.
However, Su Jian, director of Peking University National Center for Economic Research, cautioned that the outlook still depends heavily on policy support and external demand, both of which face persistent global uncertainties.
Profit Gaps Reveal Structural Challenges
Official data also reveals uneven profit performance across different types of enterprises:
- Small and medium-sized industrial enterprises (SMEs) saw profits rise 1.4% year-on-year, reversing a 1.9% decline in 2024
- State-controlled industrial enterprises recorded a 3.9% decline
- Shareholding industrial firms saw profits fall 0.1%
- Privately owned industrial companies reported flat profit growth, down from 0.5% growth in 2024
According to Yu Weining, chief statistician at the NBS’ industrial statistics department, external uncertainties and ongoing industrial transformation pressures continue to leave some companies facing operational difficulties.
Policy Effectiveness Key to Sustained Growth
Charlie Zheng, chief economist at Samoyed Cloud Technology Group Holdings, emphasized that whether the vitality of foreign-funded firms and SMEs can spread more broadly to the wider private sector will be critical for sustaining profit recovery in 2026.
He warned that profit gaps between SMEs and larger private enterprises may signal bottlenecks in policy transmission, underscoring the need for more balanced and inclusive policy support.
Conclusion
The profit rebound of foreign industrial enterprises in China in 2025 marks a significant turning point for the country’s industrial economy. While challenges remain, especially amid global uncertainty and structural adjustment pressures, improving industrial quality, high-tech momentum, and renewed foreign confidence suggest a cautiously optimistic outlook for 2026.
