Xinte Energy, a Chinese green-energy firm, says on its website that it is “delivering light and warmth to every corner of the world.” It is also losing tons of money.
The maker of polysilicon, a building block for solar panels, recently told shareholders it expects to report losses of around 4 billion yuan, equivalent to more than $500 million, for 2024. Intense pressure by the government to build up key industries has led to fierce competition and price wars while demand has stalled, hitting the company’s bottom line.
Unfortunately for China, it isn’t just the solar power industry. Companies across the country are bleeding cash as they struggle with overcapacity and weak spending in a slumping economy.
Those problems are leaving China unusually vulnerable as President Trump tightens the screws with a new 10% tariff on Chinese goods, and threats of more to come. Exports have been a rare bright spot for China’s economy as companies unload excess supply abroad, but that becomes much harder as tariffs climb and costs rise for U.S. buyers.
Nearly a quarter of companies listed in mainland China reported a net loss for the third quarter, the most recent quarter for which data is available. That share has more than doubled from before the Covid pandemic, according to a Wall Street Journal analysis of Chinese A-share company filings.
Profit margins among public companies in China recently reached their lowest levels since 2009, according to a FactSet index of roughly 5,000 mainland-listed firms. Profits at China’s major industrial firms declined around 3.3% in 2024, a third straight year of lower earnings, according to official data. Many smaller, family-owned firms are also struggling.
With profits squeezed, many Chinese companies are in cost-cutting mode, putting off investments, shedding workers and keeping wages in check. But less spending by companies and consumers leads to more of the same problem for China: weak demand when consumption is sorely needed.
The world’s second-largest economy is reeling from numerous challenges, including an epic property-market bust and rising debt loads. Construction activity has slowed and Chinese people, who largely hold their net worth in real estate, are saving money as worries about their future mount. Protests over unpaid wages and other compensation-related grievances have ticked up, according to social-media posts tracked by Hong Kong-based nonprofit China Labour Bulletin.
China’s leaders have turned to manufacturing and exports as an answer to stimulate growth. But ramped-up capacity, fueled partly by state subsidies, has exacerbated gluts in some industries. Many companies have cut prices to try to unload their products, but that just pinches profits further—which leads to even more cost cutting.
“It’s basically a race to the bottom,” said Khoon Goh, head of Asia research for ANZ bank.
The Trump administration’s new tariffs stand to further squeeze Chinese companies that sell products to the U.S., with some manufacturers saying they will have to lower prices to stay competitive for American customers.
Licking wounds
Angang Steel, based in Liaoning province and one of China’s largest steelmakers, said recently it had “made every effort to mitigate and control losses,” including trying to become more efficient and expanding exports. But steel prices kept falling and demand has remained weak. It expects 2024 losses to more than double from the year before to around 7 billion yuan, equivalent to nearly $1 billion. Angang didn’t respond to a request for comment.
Tianqi Lithium, which sells materials used to make batteries for electric vehicles, also warned investors that it was set to report a net loss equivalent to roughly $1 billion for 2024 after prices for its products fell. The Sichuan province-based company said in a filing that it would stop all work on a plant in Australia, a project under way since 2017, because it was no longer economically viable. When asked for comment, Tianqi referred the Journal to its official announcements.
