China industrial profit growth slows in May

An employee counts yuan banknotes at a bank in Beijing. Annual growth in China’s industrial profits slowed to 8.9% in May.

Reuters/Beijing

Annual growth in China’s industrial profits slowed to 8.9% in May, the weakest pace this year, signalling challenges facing Chinese firms despite signs of stabilisation in the economy.

Profits earned by Chinese industrial firms rose 8.9% in May to 512.7bn yuan ($82.6bn) from a year earlier, slowing from a 9.6% rise in April, the National Bureau of Statistics said yesterday.

The rise in profits was the slowest since December 2013.

The bureau only published combined profits for the first two months of this year, which rose 9.4% from a year earlier.

For the first five months of 2014, profits rose 9.8% from the same period of last year to 2.28tn yuan, the bureau said. The pace was slower than the 10% expansion in the first four months. Recent data reinforced market expectations that the world’s second-largest economy is powering through its recent soft patch as the government uses targeted stimulus measures to support growth, even if the recovery may be patchy.

But Chinese manufacturers, especially smaller ones, are struggling to cope with falling factory-gate prices which have eroded their profit margins.

China’s producer price index (PPI) fell 1.4% in May from a year earlier – the 27th consecutive month of decline, earlier data showed.

Among 41 sectors surveyed by the NBS, 32 reported rising profits in the first five months, led by a 49% jump in profits for petroleum refiners, coking firms and nuclear processors.

Power and heating producers and suppliers saw a 27% rise in profits during the first five months.

On the downside, profits of the coal mining and processing industry fell 44% from the same period of last year.