Recently disclosed 2025 financial reports from China revealed that out of around 5,400 non-financial enterprises listed in Shanghai and Shenzhen, 1,458 of them reported net losses, accounting for nearly 30%, breaking the historical record low set in 2024. Scholars interviewed analyzed that traditional profit models of Chinese enterprises have completely failed, with exports only temporarily propping up economic data. Without addressing issues such as insufficient domestic demand and structural problems like “state advances while private enterprises retreat,” true recovery seems challenging.
According to data from the Nikkei Chinese website citing the information provider Wind, this widespread “profit cold wave” sweeping across various industries in China marks the first time in the complete data since 2000 that overall net profits have seen a consecutive three-year dismal decline. In contrast, in Japan, only about 2% of listed companies on the Tokyo Stock Exchange’s main board reported losses.
The operational pressure on Chinese enterprises has expanded beyond the real estate sector to consumption, retail, and traditional manufacturing industries.
The Jiangsu Yanghe Distillery, once hailed alongside Guizhou Maotai and Wuliangye Liquor as the “Three Spirits,” shocked observers with its 2025 financial data: annual revenue plummeted by over one-third to 19.211 billion yuan; net profit shrank from a hundred billion scale in 2023 to 2.206 billion yuan, regressing to the level of 2010. More alarmingly, during the traditional peak season for liquor sales in the fourth quarter, Yanghe incurred a net loss of 1.769 billion yuan.
The retail industry is also struggling, with retail giants like Wangfujing Group and Guangzhou Grandbuy reporting losses. China Resources Supermarket Group recorded a net loss of 957 million yuan in 2025, down by 81.07% year-on-year, and has been incurring losses for five consecutive years since 2021, with a total amount exceeding 2 billion yuan.
Leading real estate player Vanke’s situation is even more dire, with a staggering net loss of 88.5 billion yuan in 2025, an 80% increase from the previous year, forcing negotiations with creditors for repayment extensions. Among the 108 real estate companies surveyed, 59 were in the red.
Professor Sun Guoxiang from Taiwan’s Nanhua University’s International Affairs pointed out to Dajiyuan that this phenomenon is driven by a vicious cycle of “insufficient demand leading to price declines, further compressing profits.”
He analyzed that the pillars on which Chinese enterprises traditionally relied for profitability – local investments, low-cost labor, export to foreign demand, and high leverage growth – have all failed, and they are now facing a cycle of “bursting real estate bubbles, shrinking household wealth, and insufficient consumer confidence.”
Even in the heavily subsidized new energy and technology industries, they have not been able to escape the trap of “increasing quantity without increasing profits.” China’s largest automaker BYD saw a 19% drop in net profit in 2025 to 32.6 billion yuan, the first decline in four years, mainly due to a price war triggered by tightened family budgets.
In terms of consumption, despite the government’s push with the “old-for-new” subsidy policy, the home appliance industry saw a 15% decline in profits in the second half of the year, indicating that the stimulus effects of policies are quickly fading.
Professor Sun incisively summarized this contradiction, stating that “Chinese enterprises do not lack production capacity but rather have excess production capacity, insufficient effective demand, and high institutional costs.”
He bluntly stated that the Chinese regime has pushed industries like new energy vehicles, solar energy, and batteries through massive subsidies, forcing companies to blindly expand production and undercut prices to achieve local political achievements – ultimately resulting in “internal competition leading to losses.”
In this situation, he said, although there is high output and increased exports, profits are extremely thin, and even strange phenomena like “selling more but losing more” are emerging, creating a scenario where “factories are busy, bosses are not making money, employees are unstable, and banks are tense.”
American economist Davy J. Wong offered a systemic interpretation. He told Dajiyuan that the trend of “state advances while private enterprises retreat” is squeezing the survival space of private enterprises. State-owned enterprises often promote incompetent individuals based on their loyalty rather than abilities, making it challenging for even monopolistic enterprises to turn a profit.
He criticized that this not only led to the loss of state assets but also worsened the overall national economy.
Although the official GDP growth rate for the first quarter of 2026 was announced as 5.0% by the Chinese authorities, the US-China Economic and Security Review Commission (USCC) in its briefing released on May 5 pointed out that Chinese economic data masks accumulating pressures.
Data shows that retail sales growth dropped to 0.9% in December 2025 and reached only 1.7% by March 2026, while automobile sales plummeted by 9.1%, indicating continuing consumer contraction.
China’s Consumer Price Index (CPI) and Producer Price Index (PPI) for March 2026 increased to 1.0% and 0.5% respectively year-on-year, mainly due to rising fuel costs resulting from the Middle East conflict.
Beijing-based research firm Trivium China analysts noted that this inflation caused by external pressures does not stem from a revival in consumer confidence. If companies pass on costs to consumers, it will further suppress demand; if they don’t, the already meager profits will be entirely consumed.
The twin pressures of external cost shocks and weakened consumption are directly impacting companies, with stagnant profits directly affecting the job market. In March 2026, the unemployment rate for youth aged 16 to 24 rose to 16.9%, highlighting extreme caution by companies in hiring.
This negative cycle of “companies not making money → pressure on the job market → weaker consumption power” is eroding the foundation stability of Chinese society.
Faced with the collapse of domestic demand, the market is pinning hopes on a revival driven by external demand in 2026. In the first quarter of 2026, China’s passenger car exports increased by 60.6%, and steel giant Baoshan Steel’s profit rose by 40% due to export growth. However, does this signal a genuine revival?
Professor Sun expressed significant doubts about this. He emphasized that while exports may make GDP figures “appear” to rebound, it is challenging to bring about stable and comprehensive development.
He stated that China’s current growth primarily shifts supply pressures outward, which will trigger anti-dumping tariffs and trade protection measures from Europe, America, Southeast Asia, and India.
Sun described exports as merely a “temporary fix” rather than a real solution. Without addressing residents’ income expectations, exports alone cannot address the fundamental issues.
Davy J. Wong shared a similar perspective. He pointed out that China’s product market share in Europe and the United States is declining, and though progress is made in Asia and Africa, they face a pattern of “increasing quantity but decreasing prices,” continuously shrinking profit margins.
Davy J. Wong even offered a sharp political observation: Economic downturn may not be Beijing’s primary concern. Referring to the ancient theory of “Qiongmin, Pinmin” by the Chinese reformer Shang Yang, he believed that the poorer the people, the easier they may be managed, much like in North Korea.
Wong questioned if this might be a strategic consideration for Beijing to consolidate the Communist Party’s regime.
In conclusion, he stated that the profit difficulties of Chinese enterprises are a product of a combination of systemic flaws and cyclical factors. Whether it is the inefficiencies caused by “state advances while private enterprises retreat” or the vicious internal competition triggered by industrial subsidies, it demonstrates that China’s current economic development model has reached its limit.
Wong bluntly stated that the authorities’ hope to drive the economy through consumption under the current structure is nothing but a “fool’s dream” because “political and economic structures define the limited consumption of the people.”