China's Industrial Profits Sag On Soft Demand, Deflation

Profits at industrial firms in China kept dropping in May, reflecting the impact of soft demand and ongoing factory-gate deflation, Yihui Xie reported for Bloomberg News.

Photo Insert: The sluggish factory data underlines continued economic stresses in China, where the recovery has been flashing warning signs.

Profits in May were down 12.6% from a year earlier, data published by the National Bureau of Statistics (NBS) showed Wednesday.

For the January-to-May period, profits declined 18.8%, which was somewhat slower than the almost 21% drop in the first four months of 2023. The sluggish factory data underlines continued economic stresses in China, where the recovery has been flashing warning signs.

Exports fell in May for the first time in three months, industrial deflation worsened, and the continued decline in imports underscores how weak domestic demand is.

Profits at foreign firms fell 13.6% in the first five months of the year, slightly slower than in the January-to-April period. Profits at private firms dropped 21.3%, while profits at state-owned enterprises declined 17.7%.

Falling profits will likely continue to weigh on business sentiment, which was already in decline. However, officials are still expressing confidence in the economy, with Premier Li Qiang on Tuesday saying that the growth goal of around 5% is achievable.

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