Foreign industrial companies' profits in the Chinese mainland resumed growth in 2025 after three years of contraction, signaling a renewed industrial sector momentum and rising foreign business confidence, official data showed on Tuesday.

As the profit growth of industrial enterprises overall also turned positive, experts and executives said the industrial economy has moved past the trough and is entering a phase marked by improving quality and efficiency, setting the stage for further recovery in 2026.

The National Bureau of Statistics said on Tuesday that foreign-funded industrial enterprises, and those from Hong Kong, Macao and Taiwan, posted total profits of 1.74474 trillion yuan ($250.8 billion) in 2025, up 4.2 percent year-on-year.

The growth reversed a three-year contraction — following declines of 1.7 percent in 2024, 6.7 percent in 2023 and 9.5 percent in 2022 — as part of a broader recovery in industrial profits.

In 2025, nationwide industrial enterprises above a designated size recorded total profits of 7.3982 trillion yuan, up 0.6 percent year-on-year, ending three consecutive years of decline, the NBS said.

"The rebound in foreign industrial profits reflects China's appeal in advanced manufacturing, high-tech industries and new energy supply chains, as well as the benefits from the country's opening-up, said Liu Chunsheng, an associate professor at the Central University of Finance and Economics.

Policy guidance, Liu said, has also encouraged foreign investment to flow toward central and western regions and high-tech sectors, leading to an improved investment structure.

He added that the profit turnaround of the overall industrial sector was driven by both a demand-side recovery — supported by trade-in programs and resilient exports — and supply-side improvements, including the momentum of high-tech sectors and efforts to curb destructive price competition, alongside a low base in 2024.

According to the NBS, profits in high-tech manufacturing areas such as intelligent unmanned aerial vehicle manufacturing, integrated circuit production and semiconductor equipment manufacturing all surged by more than 100 percent in 2025.

The rising quality and efficiency of China's industrial development is attracting more foreign businesses, as Covestro AG, a German manufacturer of polymers and high-performance plastics, will increase investment in China, following its manufacturing facility of thermoplastic polyurethane started operations last week in Zhuhai, Guangdong province.

"For multinational companies, China's innovation ecosystem has become a growing investment magnet," said Monique Buch, chief commercial officer of Covestro AG.

Looking into 2026, Wen Bin, chief economist at China Minsheng Bank, said industrial profits are likely to continue the recovery as steady consumption, stabilizing investment and resilient exports are poised to underpin demand, while efforts to prevent excessive price competition further support profitability.

Su Jian, director of Peking University's National Center for Economic Research, however, said the outlook for industrial profits in 2026 may depend on policy support and export, which is exposed to sustained external uncertainty.

Su said the profit divergence across companies shows that recovery may remain fragile, adding that large domestic firms may be less agile in transformation and upgrading than smaller ones and should strengthen product innovation.

Official data showed that profits of industrial small and medium-sized enterprises rose 1.4 percent year-on-year in 2025, reversing a 1.9 percent decline in 2024. By contrast, profits of State-controlled and shareholding industrial enterprises fell 3.9 and 0.1 percent, respectively.

Privately-owned industrial firms also came under pressure, whose profits remained flat from a year earlier, down from growth of 0.5 percent in 2024.

"Changes in the external environment are having a growing impact, while industrial transformation and upgrading still faces adjustment pains, leaving some enterprises in operational difficulties," said Yu Weining, chief statistician at the NBS' Department of Industrial Statistics.

Yu said efforts should focus on deepening the integration of technological and industrial innovation and optimizing the industrial structure to support continued improvements in industrial profitability.

Charlie Zheng, chief economist at Samoyed Cloud Technology Group Holdings, said, "Whether the vitality of foreign-funded firms and SMEs can be transmitted more broadly to the wider private sector will be critical to sustaining industrial profit recovery in 2026."

Zheng said that profit disparities between SMEs and private businesses suggest possible bottlenecks in policy transmission, warning against any bias where policy support benefits smaller firms but fails to reach medium- and large-sized private enterprises.

zhoulanxv@chinadaily.com.cn