China’s official data shows that in October, profits of industrial enterprises above a certain scale dropped by a significant 27.1% compared to the previous month, marking the largest decline in five months. Many experts point out that China’s economy is facing a dual crisis with its three major engines – investment, consumption, and real estate – intertwining, posing systemic risks of recession for the Chinese economy.
According to the National Bureau of Statistics of China on November 27, from January to October 2025, the total profits of industrial enterprises above a certain scale reached 5.95029 trillion yuan, an increase of 1.9% year-on-year, which is a 1.3 percentage point decrease from the 3.2% growth in the first nine months.
Looking specifically at profits in the month of October, profits of industrial enterprises above a certain scale dropped by 5.5% year-on-year and a staggering 27.1% month-on-month. This contrasts sharply with the strong profit growth of 21.6% in September and 20.4% in August, revealing a significant disparity in data.
Due to suspicions of systematic data falsification by the authorities, the actual economic situation may be even more severe than reported.
Guangda Securities analysis suggests that the decrease in profit growth of industrial enterprises in October is related to the rise in the base of the same period last year, the slowdown in industrial production, and the decline in profit margins.
In terms of industry structure, only sectors like steel, automobiles, electronics, and food and beverage in the manufacturing industry maintained positive profit growth rates. Other industries showed varying degrees of weakening profitability.
An analysis reported by Nikkei Asian Review on November 27 found that about 24% of non-financial listed companies in mainland China posted losses in the first nine months of this year, a 1 percentage point increase from the previous year due to overcapacity and weak domestic demand.
American economist David Huang pointed out that the decline in profits in October indicates that the growth in the previous two months was more of a short-term adjustment due to price changes and base effects, rather than a true recovery in market demand. The fact that around 24% of listed companies recorded losses in the first three quarters suggests a continuous squeeze on systemic profitability.
Further analysis from Huang reveals that the excessive subsidies in e-commerce may show impressive transaction volumes on paper, but for businesses, it results in low profits, high return rates, and considerable platform fees, thus signifying a false prosperity.
Against the backdrop of insufficient domestic demand and persistent overcapacity, China’s external economic relations are also facing challenges.
China problem expert Wang He pointed out that with severe overcapacity and inadequate domestic demand, China can only rely on export dumping. According to the latest World Bank report, Chinese product export prices are declining, indicating a situation of price concessions for volume. Despite selling products, the economic benefits are far from ideal.
Huang David highlighted severe overcapacity in areas like new energy vehicles, batteries, and solar panels, leading to reliance on export dumping. The EU and the US have imposed high tariffs on Chinese electric cars, Canada and other countries are guarding against Chinese market entry, and Japan is coordinating with the EU on security and industrial aspects to remain highly vigilant on China’s overcapacity.
Emphasizing the risks, Wang He noted that China is currently imposing economic sanctions on Japan. He stated, “China needs Japan’s technology, critical components, and equipment. If China decouples from Japan, especially amid the rupture between the US and China, acquiring many technologies will become very troublesome for China.”
Additionally, the crisis in the Chinese real estate sector continues to escalate. Vanke, known as the “top student” in Chinese real estate, recently applied to defer debt repayments. In response to this news, several bonds issued domestically plummeted by 20% to 30% in a single day, leading to the Shanghai Stock Exchange temporarily halting trading, hitting historic lows.
Financial reports indicate that Vanke reported a net loss of 28.02 billion yuan in the first three quarters of this year. Faced with a staggering 362.9 billion yuan in interest-bearing debt and holding only 65.6 billion yuan in cash, Vanke relies entirely on continued loans from the major shareholder, Shenzhen Metro Group, to sustain its operations.
David Huang characterized Vanke’s current situation as a transition from being a “top student” to becoming a sample of systemic risk. He speculated that when bonds plummet by 30% in a day, the market essentially prices in a high probability of restructuring or default, indicating that, from a bond market perspective, Vanke is already on the verge of default or heading down that path.
Huang raised questions about whether Beijing is willing to rescue Vanke as a showcase state-owned enterprise that must be saved, and whether the major shareholder Shenzhen Metro Group has the financial capacity and willingness to continue supporting it.
Addressing the root causes, Wang He stressed that the manufacturing industry’s dire situation is largely caused by sustained high-intensity investments. He pointed out that this approach is not driven by economic considerations but by political motives, aiming to foster global dependence on Chinese manufacturing. However, he argued that this strategy is detrimental and harmful to both China and the world.
An article in the US media outlet The Diplomat highlighted Beijing’s focus on prioritizing investment and exports over consumption because they are more easily controlled by the government. However, the political environment in China makes it impossible to achieve economic balance, hindering growth driven by consumption.
Sun Guoxiang, a professor at the Department of International Affairs and Business at Nanhua University in Taiwan, analyzed that China’s economic downturn is not just a cyclical fluctuation but a systemic decline. This encompasses three major facets:
Firstly, the collapse of the real estate sector triggering a chain reaction, leading to deteriorating enterprise profits, and worsening conditions for banks and local finances.
Secondly, weak consumption masking underlying issues; false demand supported by subsidies conceals real challenges of stagnant incomes and rising unemployment.
Lastly, the contraction of the manufacturing sector leading to the failure of traditional models; with decreased export competitiveness, the manufacturing sector struggles to return to the prosperous era of 2010.
In summary, Sun Guoxiang remarked that China’s three major economic engines – investment, consumption, and exports – are currently facing challenges simultaneously. The authorities are adjusting figures rather than capabilities, with official policy logic suggesting that real estate cannot be saved, hence allowing market forces to drive corrections. While consumption relies on subsidies and platform battles rather than income growth, the emphasis now is on maintaining basic stability without explosive growth.
Looking ahead, Guangda Securities predicts that industrial enterprise profits in China will continue to show weakness in the fourth quarter, with the “strong supply and weak demand” pattern likely to persist in the short term.
Taking into account perspectives from multiple experts, the current challenges facing the Chinese economy are not just industry-specific or short-term cyclic problems. It is a systemic challenge involving the slowdown of the three major engines of investment, consumption, and exports, compounded by multiple pressures in real estate, manufacturing, and foreign trade.