Chinese factory profits up 18.8pc in first five months

Profits of China's major industrial firms increased 18.8 percent year on year during the January-May period, surpassing a rise of 18.2 percent in the first four months, data from the National Bureau of Statistics showed on Saturday. Industrial firms with an annual main business revenue of at least 20 million yuan saw their combined profits hit 3.14 trillion yuan. For May alone, their profits rose 21.1 percent compared to a year earlier. "Upstream sectors and the computer industry saw sharp rises, while downstream manufacturing remained under pressure, in line with the producer price index, suggesting that price improvement was the main driver of corporate profit growth," said Xing Zhaopeng, senior China strategist at ANZ. Earnings trends have diverged sharply across sectors. Profits at manufacturers of computers, communication and electronic equipment soared 103.9 percent for the first five months – accounting for 43.1 percent of the growth in profits of all industrial firms – buoyed by a global AI investment boom. Profit from the non-ferrous metal ore mining and processing sector rose 93.9 percent. By contrast, profits at automakers dropped 19.8 percent despite robust exports while furniture makers' profits plunged 58.4 percent. Xu Tianchen, senior economist at the Economist Intelligence Unit, said the differentiation highlights the importance of a de-escalation of the Iran conflict. "As shipping through the Strait of Hormuz resumes and international oil prices fall, we should see a gradual recovery in downstream profits." Analysts expect Chinese policymakers to step up targeted support to stabilise corporate profitability, particularly as consolidation accelerates in sectors grappling with overcapacity and cut-throat competition. (Xinhua & Reuters) Edited by Azam Khan