Official data on Sunday showed that profits at China’s industrial companies rose 36.4% to 829.92 Billion Yuan ($128.58 Billion) in May, compared with a year ago.
According to the National Bureau of Statistics, this was a slower pace than the 57% increase reported in April.
Although the world’s second largest economy has mostly recovered from the disruptions caused by COVID-19 it still faces new challenges like rising raw material costs and tighter global supply chains. Officials warn that China’s recovery is uneven.
High commodity prices led to imbalances in profitability between upstream and downstream companies, according Zhu Hong, a statistic bureau official.
In a statement that was attached to the data, he stated that “the foundation for recovery is still not solid”.
Zhu stated that profits grew quickly in the petroleum, metals and chemical sectors while smaller and more downstream companies were subject to greater pressure.
Industrial firms’ profits increased by 83.4% over the same period last year to 3.42 trillion Yuan in January-May.
In May, factory-gate inflation experienced its fastest annual growth for over 12 years. This was due to rising commodity prices.
China’s policymakers have intensified efforts to reduce runaway metals prices in recent weeks, including selling state reserves supplies. However, analysts are unsure if the move will have much impact as global demand continues to recover.
China’s official manufacturing data for this week will show a lower growth rate in June than expected, probably due to disruptions caused in part by COVID-19 flare ups at major ports in the country’s southern regions. Investors will also be monitoring trends in input costs, and selling prices to identify any signs of further margin pressure.
At the end of May, liabilities at industrial companies were up 8.2% year on year compared to 8.6% growth one month earlier.
Industrial profit data includes large companies with an annual revenue of more than 20 million yuan.
