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Qabil Ashirov

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In recent years, China’s economy has moved away from the high-speed growth trajectory that once defined it, entering instead a more complex and contradictory stage. The headline figure for 2025—industrial companies’ total profits rising by just 0.6 percent to 7.39 trillion yuan—may look positive at first glance. Yet beneath this modest increase lie serious challenges: persistent U.S.–China trade tensions, tariff wars, structural inefficiencies, and the broader uncertainty clouding the global economy.

The trade conflict with the United States remains one of the most significant risk factors for China’s economic outlook. Tariffs imposed by Washington have raised costs for Chinese exporters, particularly in electronics, machinery, and technology. Profit margins in these sectors have narrowed considerably, and the first half of 2025 reflected this pressure. Many companies were forced to scale back production or search for alternative markets, underscoring the vulnerability of China’s industrial base to external shocks.

Nevertheless, the second half of the year brought some relief. Progress in tariff negotiations created conditions for a partial recovery, with industrial profits rising 5.3 percent in December. This rebound demonstrates that China retains a capacity to adapt to external pressures, thanks to the manufacturing and supply infrastructure built over decades. The fact that the system did not collapse under strain is evidence that Beijing’s long-term investment in industrial resilience has not yet been exhausted.

Still, the picture is uneven. Data from the National Bureau of Statistics reveal that profits in state-owned enterprises fell by 3.9 percent. This decline highlights the persistent inefficiency of the state sector and the growing burden of debt. State-owned firms remain important for employment and strategic stability, but their weak financial performance places additional pressure on the banking system and the government budget. The contradiction is clear: while these enterprises serve social and political purposes, their economic drag cannot be ignored.

The private sector presents a different, but equally mixed, story. Profits have remained stable—neither collapsing nor showing significant growth. This stagnation reflects both resilience and limitation: the sector has avoided crisis but has not generated the dynamism needed to drive the economy forward. By contrast, foreign companies operating in China recorded a 4.2 percent increase in profits. This suggests that the Chinese market remains attractive to international capital, even in a period of slower growth. Foreign firms benefit from more flexible management structures and diversified risk strategies, allowing them to adapt more quickly to changing conditions.

China’s economic health matters far beyond its borders. Accounting for roughly one-fifth of global GDP, China is a cornerstone of the international system. Even modest growth in Chinese industry reduces the risk of global recession, ensuring that trade flows—particularly in Europe and Asia—continue rather than collapse. For commodity markets, China’s relative stability is equally significant. Continued demand for oil, gas, metals, and other resources provides crucial support for exporting nations, helping to prevent sharp price shocks. In this sense, China’s weak but positive growth acts as a stabilizing force for the global economy.

Yet risks remain. The sluggish pace of Chinese growth means global demand cannot strengthen substantially. The world economy still lacks a clear locomotive, and uncertainty persists about whether China can resume its former role. A return to rapid expansion in the near term appears unrealistic. The more plausible scenario is “slow but steady” growth. If tariff negotiations continue to advance, China’s industry may gradually recover. But if tensions flare again, both China and the global economy could face renewed turbulence.

Looking further ahead, China’s challenges are structural. Strengthening domestic demand is essential to reduce reliance on exports. Reforming the state sector is critical to address inefficiency and debt. Reducing dependence on foreign technology is equally urgent, as geopolitical competition increasingly shapes the global economic landscape. Success in these areas would allow China to maintain its position as one of the pillars of the global economy. Failure to act decisively could leave the country vulnerable to stagnation and external shocks.

In conclusion, China’s current weak growth neither rescues the world economy nor plunges it into crisis. It represents a fragile balance: enough to prevent collapse, but insufficient to inspire confidence. The future of global stability will depend heavily on the economic and political choices made in Beijing. Whether China embraces reform and adapts to new realities, or remains trapped in structural contradictions, will determine not only its own trajectory but also the fate of the global economy.