China’s industrial profits face slower growth in May

China’s industrial profits reported a 0.7 per cent year-on-year increase in earnings for May, a significant drop from the four per cent growth in April, the National Bureau of Statistics (NBS) announced on Thursday.

Cumulative gains for the first five months have also decreased to 3.4 per cent from 4.3 per cent in the previous period.

The economic landscape is challenging, with downbeat indicators affecting various sectors, including China’s property sector. This has impacted industries like construction materials and household goods, as well as consumer confidence.

Yu Weining, an NBS statistician, highlights the need for stronger domestic demand to support industrial profits. Short-term factors, like a slowdown in investment proceeds growth, are hindering the recovery, Yu added.

The automobile industry is facing challenges with a 4.6 per cent profit margin in the first four months, below the five per cent average in the broader factory sector. Export and competition issues are impacting automakers’ earnings.

Zhou Maohua, a macroeconomic researcher at China Everbright Bank, explains that the recent profit slowdown in China’s industrial sector is due to declining product prices, and rising production costs.

State-owned firms saw a 2.4 per cent profit decline, while foreign firms recorded a 12.6 per cent gain and private-sector companies saw a 7.6 per cent increase in profits.

The reported figures encompass profits from firms with annual revenue exceeding 20 million yuan ($2.76 million) from their core operations.

Attribution: Reuters