China's industrial profit growth slows as domestic demand remains weak
New Delhi, June 28
China's industrial profit growth slowed in May for the first time in six months, indicating that stronger exports and rising producer prices were insufficient to fully offset persistent weakness in domestic demand, a report has said.
Data released by China's National Bureau of Statistics (NBS) showed that industrial profits increased 21.1 per cent year-on-year in May, easing from the 24.7 per cent growth recorded in April. The moderation marked the first slowdown in profit growth since November, according to The Edge Singapore report.
During the January-May period, industrial companies reported a profit increase of 18.8 per cent from a year earlier, slightly below market expectations of 19 per cent.
The softer growth comes despite improving conditions in China's industrial sector. The country emerged from more than three years of factory-gate deflation in March, while producer prices rose in May at their fastest pace since 2022. Strong overseas demand and the global boom in artificial intelligence investments have supported China's advanced manufacturing industries.
According to the statistics bureau, the raw-materials manufacturing sector accounted for 10.2 percentage points of the overall profit growth during the first five months of the year. High-tech manufacturing contributed eight percentage points, while equipment manufacturing added 5.2 percentage points.
The NBS said rising demand linked to artificial intelligence applications boosted earnings in the electronics industry as well as in non-ferrous metals sectors such as aluminium and copper. Higher commodity prices, partly driven by disruptions in global energy markets due to tensions in the Middle East, also supported industrial profits.
However, analysts said the latest figures highlight the continued pressure from weak domestic demand. Sluggish investment activity and cautious household spending have limited the strength of the broader economic recovery, reducing the benefits from stronger exports and improving industrial prices.
The profit figures also benefited from a low comparison base, as industrial earnings had fallen 9.1 percent in May last year.
Total industrial profits reached 3.14 trillion yuan during the first five months of 2026, remaining below the level recorded during the same period in 2022.
"The problem of strong supply and weak demand within the country remained outstanding and companies in some industries were still facing difficulties," NBS analyst Yu Weining said in a statement.
— IANS
Reader Comments
The article mentions AI investments boosting electronics and metals sectors. India has a huge opportunity here—we have engineers, we have a domestic market. But we need to fix our supply chains and energy costs. China's profit dip is a reminder that no economy is immune to weak demand. We need to boost purchasing power.
Interesting data. The 'strong supply, weak demand' problem is textbook economic imbalance. China's factories produce, but people aren't buying. Reminds me of India's own industrial issues—we have overcapacity in some sectors but weak rural demand. The government should focus on job creation and income growth, not just manufacturing output numbers.
As a Canadian watching global trends, China's profit slowdown seems like a natural correction after their post-COVID recovery blip. But the underlying domestic demand weakness is concerning for everyone who relies on Chinese exports for materials or products. India might benefit from some displaced investment if this continues.
I find it ironic that China, the 'world's factory', is now struggling with weak domestic demand. Meanwhile, in India, we import many Chinese components for our electronics. Maybe this is a wake-up call for us to diversify our supply chains? But first, we need to improve our own manufacturing quality and scale. 😕
The data shows profits grew 21% in May—still very strong by global standards. Yes, it's a slowdown from 24.7%, but many countries would be happy with such numbers. The real story is whether this is a blip or a trend. For India, we should focus on building our own industrial base rather than comparing with
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