China industrial firms post first monthly rise in 6 months in May

Shanghai

PROFITS at China's industrial firms rose for the first time in six months in May, suggesting the country's economic recovery is gaining traction and brightening the outlook for manufacturing investment and jobs.

China's national bureau of statistics said profits at China's industrial firms in May rose 6 per cent year-on-year to 582.3 billion yuan (S$114.6 billion), according to a statement on Sunday.

The rebound followed a 4.3 per cent fall in April, and is its sharpest monthly gain since March 2019.

Economic activity in China is clearly improving after the lifting of tough 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's earnings growth, "market demand remains relatively weak amid the epidemic, and sustainability of the profit recovery deserves further observation," Zhu Hong, senior statistician at the statistics bureau, said in the statement.

Earnings for Chinese factories were hit by the sharpest factory-gate price drop in more than four years recorded in May, while exports slipped again, erasing a transient gain in April. For the first five months of 2020, industrial firms' profits fell 19.3 per cent from the same period last year to 1.84 trillion yuan.

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May's profit growth was aided by significant profit recoveries in key industries including oil refinery, power, chemicals and steel.

Mr Zhu also attributed May's profit growth to easing cost pressures, improving profit margins, positive impact from policy stimulus and much higher investment returns. REUTERS