© Reuters. FILE PHOTO: Worker welds a steel tire to a bicycle at a factory that makes sports equipment in Hangzhou, Zhejiang2/2
SHANGHAI (Reuters) – Profits from China’s industrial companies rose for the first time in six months in May, suggesting that the country’s economic recovery is gaining ground and improving prospects for manufacturing investment and jobs.
China’s national statistics bureau said China’s industrial business earnings in May increased 6% yoy to 582.3 billion yuan ($ 82.28 billion), according to a statement on Sunday.
The rebound followed a 4.3% drop in April and is its biggest monthly gain since March 2019.
Economic activity in China is clearly improving after the lifting of harsh virus containment measures that led to weeks of near paralysis. But the recovery has been uneven and demand at home and abroad remains sluggish amid concerns of a second wave of infections and a global recession.
Despite May earnings growth, “market demand remains relatively weak amid the epidemic, and the sustainability of the earnings recovery deserves further observation,” said Zhu Hong, senior statistician at the statistics bureau. in the statement.
Profits for Chinese factories were hurt by the biggest drop in factory prices in more than four years in May, while exports fell again, erasing a temporary gain in April.
Steel futures prices, which have risen this year due to a government push for more infrastructure projects, fell last week as rising steel production and sluggish demand from downstream users fueled concerns about excess steel. offer.
During the first five months of 2020, earnings of industrial companies fell 19.3% from the same period last year to 1.84 trillion yuan.
May earnings growth was helped by major earnings recoveries in key industries such as oil refining, energy, chemicals and steel.
For example, the oil refinery sector posted a gain of 11.6 billion yuan in May, up 8.9% year-on-year, ranging from a loss of 21.8 billion yuan the previous month. Profits in the electricity sector grew 10.9% in May, compared with a decrease of 15.7% in April.
Zhu also attributed May’s earnings growth to decreased cost pressures, improved profit margins, the positive impact of political stimulus, and much higher investment returns.
Profits for industrial companies controlled by the state of China fell 39.3% annually during January-May, compared with a 46.0% drop in the first four months, data from the statistics office showed.
Private sector profits fell 11% in the first five months, declining from the 17.2% drop from January to April.
Liabilities at industrial companies increased 6.6% yoy at the end of May, compared with a 6.2% increase at the end of April.
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