NEW YORK (CNBC) - China’s industrial profits plunged 9.1% in May from a year earlier, in the latest sign that Beijing’s stimulus efforts are falling short in boosting enterprises’ profitability.
That marked the largest monthly decline since October last year, when the industrial profits dropped 10%. Industrial profits are a key measure of the financial health of factories, mines and utilities in China.
Cumulative profits at major industrial firms fell 1.1% in the first five months of 2025, compared to a year earlier, the data showed.
The statistics bureau attributed the sharp decline in May to insufficient domestic demand and lower prices for industrial products.
In September last year, industrial profits recorded an eye-watering 27.1% year-on-year drop, leading Beijing to ramp up stimulus in its bid to reverse the slump in corporate earnings.
During the five-month period, the mining industry saw profits decline 29%, while manufacturing and utility industries saw modest profit gains.
Profits in the automotive manufacturing sector dropped 11.9% from a year earlier.
State-owned firms recorded a 7.4% drop in profits in the first five months, while non-state-owned businesses saw profits fall 1.5%.
Foreign industrial firms, including those with investments from Hong Kong, Macau and Taiwan, saw a modest profit rise of 0.3% in the January to May period from a year ago.
The data followed a mixed bag of economic data out of China last month. China’s retail sales grew at their fastest rate since late 2023 in May, rising 6.4% from a year ago, as government subsidies helped boost consumption, while industrial output and fixed-asset investment both missed expectations.
The recovery in retail sales did not translate into greater profits for businesses due to depressed price levels, said Alfredo Montufar-Helu, senior advisor for China Center at think tank The Conference Board.
On the supply side, a deepening price war is ripping through industries, Montufar-Helu added, as companies are “fiercely vying for market share” at the expense of profit margins.
Economists had suggested that Chinese authorities may withhold additional stimulus firepower until signs of deeper economic stress emerge.
With most economic indicators pointing to robust performance in the economy, the latest decline in industrial profits is unlikely to “serve as a counterbalancing factor that will spur government actions,” said Tianchen Xu, senior economist at Economist Intelligence Unit.