China industrial profits rise again, but growth slows in May

China’s industrial profits rose 21.1% year on year in May, but the gain slowed from 24.7% in April, exposing a widening split between factory output tied to exports and a softer domestic market. For January through May, industrial profits were up 18.8% from a year earlier, keeping earnings elevated even as growth momentum eased.

The National Bureau of Statistics of China said industrial value added rose 4.5% in May, equipment manufacturing output increased 9.5% and high-tech manufacturing rose 15.1%, while the Manufacturing PMI held at 50.0%, the line separating expansion from contraction. Those figures show factories were still growing, but the consumer side remained weaker, with the property downturn and deeper structural imbalances continuing to weigh on activity.

The strongest profit gains were concentrated in sectors linked to technology and upstream materials. In the January-to-May period, profits in the computer, communication and electronic-equipment sector jumped 103.9% and accounted for 43.1% of total industrial profit growth. Non-ferrous metal ore mining and processing posted a 93.9% increase. Electronics-sector profits rose 107.7% in January through April, while high-tech manufacturing profits were up 44.8% and equipment manufacturing profits rose 15.4%, reinforcing the role of policy support and technology demand in carrying the totals.

Not every industry benefited. Automaker profits fell 19.8% in January through May despite robust exports, and furniture makers saw profits drop 58.4%. ANZ economist Zhaopeng Xing said upstream sectors and the computer industry posted sharp gains while downstream manufacturing remained under pressure, a pattern that points to price improvement rather than broad-based demand. That gap matters for global trade, because Chinese producers can keep shipping more even as weaker home demand restrains pricing power and leaves excess output looking for buyers abroad.

The external risks are not limited to trade. EIU senior economist Tianchen Xu said a de-escalation of the Iran conflict could help downstream profits recover if shipping through the Strait of Hormuz resumes and international oil prices fall. The People’s Bank of China has also instructed some commercial banks to increase lending this month, a sign that credit demand remains soft as Beijing tries to stabilize corporate profitability.

The NBS said industrial-enterprise profits cover firms with annual main business revenue of at least 20 million yuan. In its broader May release, the bureau said effective macro policies and a recovery in industrial product prices supported the profit gains, even as the domestic imbalance remained clear.