China’s Industrial Profits Take a Hit: Analyzing July’s Decline and Market Implications
China Industrial Profits Fall 1.7% in July, Defying Expectations; Hang Seng Index Experiences Mixed Movement
By Bob Mason | Published August 27, 2025, 02:36 GMT
China’s industrial profits drop 1.7% in July during the January to July period. The fall comes close to the 1.8% that experts had predicted. Tariffs, lower global demand, and price cuts from fierce competition add weight to the loss.
Industrial Profits and Margins Under Pressure
The drop in profits is a sign of weakness in China’s manufacturing sector. Companies now face high input costs and lower selling prices. US tariffs and soft export numbers push margins down. These pressures also make it hard for firms to win new business.
Manufacturing Sector Weakness Reflected in PMI Data
China’s S&P Global Manufacturing Purchasing Managers’ Index fell from 50.4 in June to 49.5 in July. The score slipping below 50 shows that manufacturing activity is contracting. Export orders have dropped for four months in a row.
Key points in the PMI report include:
• Export orders falling for a fourth month
• Input prices rising with higher raw material costs
• Companies cutting selling prices to deal with competition
Lower demand and squeezed margins force manufacturers to reduce their workforce. Fewer jobs add to the problems in the labor market and may slow Beijing’s drive to boost domestic spending.
Labor Market Challenges Mount
China’s job market shows signs of strain. The overall unemployment rate rose to 5.2% from 5.0% in June. Youth joblessness climbed from 14.5% to 17.8% at the same time. Many new graduates now face a hard search in a tight job market. Policymakers are working on plans that bring more jobs and steady the economy.
Beijing’s Policy Response to Economic Headwinds
With the economic speed dropping in the third quarter, Premier Li Qiang has announced plans to increase government spending, steady the housing market, and fix work market issues. Experts expect Beijing to introduce more support measures this year to meet the 5% GDP goal for 2025. Natixis Asia Pacific Chief Economist Alicia Garcia Herrero said:
"China may meet its 2025 growth aim if more stimulus comes; the later months must face risks from trade issues and falling prices. The government is ready to add more steps when needed."
Market Reaction and Outlook
While profits fell less than expected, the market did not show full confidence. The Hang Seng Index reached 25,653 and then dropped to 25,565. It finally closed 0.26% higher at 25,592. Meanwhile, Mainland China’s CSI 300 and Shanghai Composite Index dropped slightly by 0.05% and 0.18%.
Looking ahead, the National Bureau of Statistics Manufacturing PMI for August and new trade talks with the US will shape views. Reports say China’s trade official Li Chenggang may soon visit Washington to restart discussions. A PMI score above 50 could ease worries, while a lower score might push Beijing to push stronger measures to boost growth.
About the Author:
Bob Mason has more than 28 years of experience in finance. He studies money, raw goods, stocks, and major economic trends across Europe and Asia.
For more detailed reading and current market views, visit FXEmpire’s Economic Calendar.
Full money-growing playbook here:
youtube.com/@the_money_grower
