China's first-quarter industrial profits return to growth amid tariff woes

China's industrial profits returned to growth in the first quarter, official data showed on Sunday, but are likely to come under further pressure amid a trade war with the United States.

With Washington's aggressive tariffs threatening to hit China's crucial export engine hit and no time frame yet for any bilateral trade talks, economists and investors are waiting for the Chinese government to roll out more support measures to cushion the blow to the world's second-largest economy.

Cumulative profits of China's industrial firms rose 0.8% to 1.5 trillion yuan ($205.86 billion) in the first quarter from a year earlier, the National Bureau of Statistics (NBS) data showed, reversing a 0.3% decline in the first two months.

In March alone, profits rose 2.6% on-year.

The profit gain in the first quarter followed a 3.3% fall in 2024, reversing the trend of continuous declines in cumulative profits of enterprises since the third quarter of last year, Yu Weining, an NBS statistician, said in a separate statement along with the data release.

Thanks to a consumer goods trade-in campaign, profits in the wearable smart device manufacturing sector soared by 78.8% while those for household kitchen appliance makers rose 21.7%, said the statement.

China reported stronger-than-expected economic growth in the first quarter as government stimulus boosted consumption and supported investment, but deflationary pressures persisted, ripping into corporate profits and workers' incomes as firms tried to navigate rising trade disruptions.

"At the current stage, the external environment is becoming more complex and severe, and unstable and uncertain factors are increasing," said Yu, adding the government will further strengthen policy implementation and promote the continuous improvement of corporate profitability.

Beijing has made increasingly louder calls on exporters to find local buyers as an alternative to the U.S. market, now effectively frozen after Washington hiked tariffs on Chinese goods by 145%, but many export-reliant factories have decried weak domestic demand, price wars, low profits and payment delays in the Chinese market.

The ruling Communist Party's Politburo on Friday pledged to support firms and workers most affected by the impact of U.S. tariffs, also saying new monetary tools and policy financing instruments will be set up to boost innovation, consumption and foreign trade.

Profits at state-owned firms dipped 1.4% in the first quarter. Private-sector companies saw a 0.3% fall, but foreign firms recorded a 2.8% gain, according to a breakdown of the NBS data.

Industrial profit numbers cover firms with annual revenue of at least 20 million yuan from their main operations.