China’s industrial profit growth decelerated in May after six consecutive months of growth, as per a report. Data from China’s National Bureau of Statistics revealed a 21.1% year-on-year profit increase in May, down from April’s 24.7% growth. This slowdown, the first since November, was below market expectations during the January-May period.
The industrial sector in China has shown signs of improvement despite the profit slowdown. After over three years of factory-gate deflation, China saw a rise in producer prices in May. The growth was supported by strong overseas demand and significant investments in artificial intelligence, particularly in advanced manufacturing sectors.
Key sectors contributing to profit growth included raw-materials manufacturing, high-tech manufacturing, and equipment manufacturing. Demand related to artificial intelligence applications boosted earnings in electronics and non-ferrous metals industries. Additionally, higher commodity prices, partly due to global energy market disruptions, also played a role in supporting industrial profits.
However, analysts noted that weak domestic demand continues to pose challenges. Limited investment activity and cautious consumer spending have hindered the economic recovery, offsetting the gains from exports and industrial price improvements. The comparison base also influenced profit figures, as industrial earnings had dropped significantly in May last year.
Industrial profits in the first five months of 2026 totaled 3.14 trillion yuan, remaining below the levels seen in the same period in 2022. NBS analyst Yu Weining highlighted persistent issues of oversupply and weak domestic demand, particularly affecting certain industries.
