China industrial profits rise again, but growth slows in May

China’s major industrial firms posted another solid month of profit growth in May, but the pace eased to 21.1% from a year earlier, down from 24.7% in April, the first slowdown since November. Profits for January through May rose 18.8% year on year to 3.14 trillion yuan, or about $433 billion, underscoring how heavily the economy is still relying on factories and overseas shipments.

The National Bureau of Statistics defines major industrial firms as companies with annual main business revenue of at least 20 million yuan, about $2.93 million. Its latest figures show an economy that is still expanding, but doing so unevenly. Earlier data had already pointed to 18.2% profit growth in the first four months, with April alone up 24.7%, helped by macro policy support and new growth drivers.

The strongest gains came in equipment manufacturing and high-tech manufacturing, with manufacturers of computers, communications and electronic equipment posting a 103.9% jump in profits in the first five months. Non-ferrous metal mining and processing also recorded strong gains, helped by price improvements in upstream sectors and a global AI investment boom that kept demand for chips, servers and related hardware resilient.

The weakness was more obvious farther down the chain. Automakers’ profits fell 19.8% even as exports remained robust, while furniture makers saw profits plunge 58.4%. That split shows how little help households are providing to growth at home, with consumption still soft and the property downturn continuing to drag on demand for everything from home furnishings to vehicles. The result is an economy that can still post healthy industrial profits, but only by leaning on production for export markets.

That imbalance matters well beyond China. Heavy reliance on factory output raises the risk of more trade friction with major partners already wary of Chinese exports, while a supply-led recovery can add deflationary pressure if firms keep shipping goods into soft global demand. China’s central bank has also told some commercial banks to increase lending this month, a sign officials remain concerned about weak credit demand and sluggish spending at home. One economist said downstream profits could recover if tensions in the Iran conflict area ease and shipping and oil-market disruptions around the Strait of Hormuz subside, a reminder that China’s industrial outlook is tied as much to global shocks as to Beijing’s policy support.