China’s major industrial companies posted sustained profit growth in May, but the pace slowed noticeably compared to previous months. Industrial profits rose by 21.1% year on year, down from a 24.7% increase in April. This marks the first deceleration since late last year, signaling uneven economic expansion.
From January through May, industrial profits totaled 3.14 trillion yuan (around $433 billion), reflecting the economy’s continued dependence on manufacturing and exports. The National Bureau of Statistics defines these firms as those with annual main business revenue of at least 20 million yuan (roughly $2.93 million), covering a broad spectrum of China’s industrial base.
While overall profits remain solid, growth is unbalanced across sectors. Equipment manufacturing and high-tech industries led gains, with companies producing computers, communication devices, and electronic equipment seeing profits surge by more than 100% in the first five months. Another high performer was the non-ferrous metal mining and processing sector, buoyed by higher prices and strong global demand fueled by an AI investment boom.
Conversely, industries closer to consumer markets showed signs of strain. Automotive manufacturers experienced nearly a 20% profit decline, while furniture makers faced a dramatic 58.4% drop. This divergence underscores the ongoing weakness in domestic consumption, affected by cautious household spending and a persistent property market downturn, which has dampened demand for vehicles and home goods alike.
The economy increasingly depends on exports to drive industrial profitability, a dynamic that carries broader implications. Heavy reliance on factory output heightens the risk of trade tensions with international partners wary of growing Chinese exports. Moreover, a production-led recovery amid muted global demand can exert deflationary pressures on prices.
In response to slowing domestic activity, China’s central bank instructed some commercial lenders to boost credit this month, indicating concern over continued soft spending and weak loan appetite. Analysts note that downstream industrial profits could improve if international tensions affecting shipping routes and oil markets ease, highlighting the impact of global developments on China’s industrial outlook alongside government policy measures.