China Industrial Profits Climb 21% in May as Growth Pace Slips
Chinese industrial profits rose 21.1% in May, down from April's 24.7%, as AI-driven electronics surged while automakers posted steep losses.
China's major industrial firms posted a 21.1% year-on-year profit gain in May, the National Bureau of Statistics reported over the weekend, marking the fifth straight month of double-digit growth but a clear deceleration from April's 24.7% surge. The January-May cumulative profit growth reached 18.8%, edging past the 18.2% recorded through the first four months of the year, signaling that gains are broadening but unevenly distributed.
The technology sector is driving the bulk of the expansion. Profits at manufacturers of computers, communications and electronic equipment surged 103.9% in the January-May period, accounting for 43.1% of all industrial profit growth, fueled by insatiable global demand for artificial intelligence infrastructure. Specialized electronic materials producers within the semiconductor supply chain posted an extraordinary 665.4% profit increase over the same stretch, according to NBS figures.
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The picture darkens sharply outside the tech sector. Automakers saw profits collapse 19.8% despite robust export volumes, a direct reflection of margin compression driven by fierce domestic price competition and sluggish consumer spending. Furniture manufacturers fared even worse, posting a 58.4% profit decline, underscoring how weak household demand continues to drag on industries tied to the domestic economy and the prolonged property sector downturn.
Operating profit margins for major industrial firms reached 5.56% in January-May, the highest cumulative reading since 2024 and up 0.63 percentage points year on year, with NBS statisticians crediting sustained declines in unit production costs. Analysts at the Economist Intelligence Unit, cited by Reuters, pointed to a gradual reopening of Strait of Hormuz shipping lanes and lower oil prices as key catalysts needed to ease cost pressure and restore downstream margins. Meanwhile, Beijing has instructed select commercial banks to accelerate lending, a signal that policymakers are moving preemptively even as weak credit demand suggests underlying confidence remains fragile.
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