China's industrial profits' fall narrows in May as recovery continues

China’s industrial firms saw profits decline at a slower pace in May, as logistics and supply chains gradually improved amid recovery.

The country’s industrial profits fell 6.5 percent year on year last month, retreating 2 percentage points from April, data from the National Bureau of Statistics (NBS) showed on Monday.

In the first five months of 2022, the industrial firms saw their profits increase by 1 percent year on year to 3.44 trillion yuan ($514 billion), according to NBS.

As COVID-19 restrictions were gradually lifted and companies resumed work and production, the decline of profits among industrial companies in the Yangtze River Delta and northeast regions were significantly narrower than the previous month.

The decline of industrial firms’ profits across Shanghai, Jiangsu, Jilin and Liaoning narrowed by more than 20 percentage points from the previous month, said Zhu Hong, an NBS senior statistician.

China’s northeastern Jilin Province and eastern Yangtze River Delta, where Shanghai is located, have implemented different degrees of closed-off management to contain a new wave of COVID-19 since March.

Jilin Province started to phase out closed-off management in late April. Shanghai has gradually restored the normal order of production and life across the city with routine COVID-19 prevention and control measures since June 1. 

Profits improved in the consumer goods industry with the gradual recovery of market demand and the launch of favorable policies to boost consumption. Profits in the wine and beverage sector jumped 21.1 percent year on year in May, while food manufacturing industries grew by 7.7 percent.

Zhu cautioned that cost pressures continue to weigh on enterprises and they are still facing production and operation difficulties.

Amid the complex international situation and uncertainties in the recovery of industrial enterprises’ efficiency, it’s necessary for China to implement the package of policies and measures introduced to stabilize the industrial economy, Zhu added.

China has unveiled a detailed policy package that aims to stabilize the economy in May. The package covers six areas, including fiscal, consumption and supply chain, with a total of 33 measures.