Navigating China’s Economic Storm: Shrinking Profits and Property Market Turmoil
China Faces Increasing Growth Risks as Property Market Struggles Combine with Weak Industrial Profits
By Bob Mason | November 27, 2025
China’s outlook shows strain. The stress grows in the property sector and weak industrial profits slow the pace. US–China trade tensions ease, yet corporate earnings, retail sales, and property signals worry Beijing as it aims for 5% GDP growth in 2025. Industrial Profits Fall Short Amid Margin Pressures
On November 27, data shows industrial profits grew only 1.9% year-to-date through October. This growth pace slows from September’s 3.2% and misses the 3.8% that economists expected. A brief rebound in August and September had raised hope for stronger activity.
Lower profits put pressure on industrial firms. Soft demand from abroad and high production costs make margins lean. This pressure may force firms to cut wages or jobs, which in turn can cool household spending. Retail sales slowed from 3.0% in September to 2.9% in October. The drop contrasts with May’s 6.4%, even after government actions to boost spending by using subsidies and fiscal measures.
Persistent Property Market Woes Compound Economic Pressures
The housing sector shows renewed stress. This sector once added nearly 25% of GDP. State-backed developer Vanke saw its bonds drop by over 20% before trading halted on five bonds. Analysts compare this drop to early-year swings when default fears sent shockwaves.
Credit experts see two paths for Vanke. One path skips a government rescue and leads to deep financial loss. The other expects central support to calm the market. Since Vanke is a large developer, its health reflects the state of the broader market.
The Hang Seng Mainland Properties Index fell 0.21% on November 26. It slipped another 0.48% in early trading on November 27, even if Beijing sent policy signals. Some measures under discussion include mortgage subsidies for first-time buyers, more income tax rebates for holders, and lower transaction costs to keep housing demand steady and stop more decline.
Corporate Earnings Echo Demand and Margin Challenges
Chinese automaker Li Auto reported third-quarter results on November 26. The report shows a 36.2% drop in revenue over the year because vehicle deliveries sank by 39%. Li Auto ended the quarter with a net loss. It expects 100,000 to 110,000 vehicle deliveries in the fourth quarter.
Trade Progress Fails to Offset Domestic Economic Challenges
US–China trade relations have improved, and leaders from both sides hint at calmer trade by year-end. The easing of export restrictions helps world trade. Yet, data from China shows weak domestic demand and a soft housing market continue to trouble the economy.
Market Reaction and Outlook
China’s stock markets rose as trade tensions eased and policy hints appeared. The CSI 300 index climbed 0.72% to 4,550 on November 27. The index nears a three-day rise and may test its 2025 high of 4,762 if the trend holds. In Hong Kong, the Hang Seng Index grew a bit too. It enjoyed a four-day rise but stayed below its October top.
Experts watch the coming data. The National Bureau of Statistics’ private sector Purchasing Managers’ Index is one sign. A weak PMI could put more doubt on China’s growth targets and force policymakers to act with new stimulus steps.
Conclusion
China’s growth path grows more uncertain. Industrial margin pressures mix with housing market stress to test Beijing’s goals. Policymakers now must balance fiscal and monetary aid to boost demand without causing more issues. Improved trade news brings hope, yet the home market and internal demand now have a key role in the rest of 2025. — End —
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