Profits of Chinese industrial companies in May post their first monthly increase in 6 months By Reuters

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© Reuters. FILE PHOTO: Worker welds steel bicycle rim at sports equipment manufacturing plant in Hangzhou, Zhejiang

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SHANGHAI (Reuters) – Profits of Chinese industrial enterprises increased for the first time in sixth month in May, suggesting that the country’s economic recovery is accelerating and brightens the outlook for investment and jobs in the manufacturing sector .

China’s national statistics bureau said profits of Chinese industrial enterprises rose 6 percent year-on-year to 582.3 billion yuan (82.28 billion US dollars), according to a statement released on Sunday.

The rebound followed a 4.3% drop in April and was its strongest monthly advance since March 2019.

Economic activity in China is clearly improving after the lifting of strict virus containment measures that have led to weeks of virtual paralysis. But the recovery has been uneven, and domestic and foreign demand remain sluggish amid fears of a second wave of infections and a global recession.

Despite May’s earnings growth, “market demand remains relatively weak in the midst of the epidemic, and the sustainability of the profit recovery deserves closer observation,” said Zhu Hong, senior statistician at the statistics office in the press release.

Profits in Chinese factories were hit by the largest drop in ex-factory prices in more than four years in May, while exports fell again, wiping out a transient gain in April.

Steel futures prices, which jumped this year at the behest of the government for more infrastructure projects, fell last week as rising steel production and weak user demand for downstream have raised concerns about oversupply.

For the first five months of 2020, profits of industrial enterprises fell 19.3% from the same period last year to 1.84 trillion yuan.

Profit growth in May was aided by large profit recoveries in key sectors such as petroleum refineries, electricity, chemicals and steel.

For example, the oil refinery sector posted a profit of 11.6 billion yuan in May, up 8.9% year-on-year from a loss of 21.8 billion yuan. yuan the previous month. Electricity sector profits rose 10.9% in May from a 15.7% drop in April.

Zhu also attributed May’s profit growth to easing cost pressures, improving profit margins, the positive impact of stimulus packages and much higher returns on investment.

Revenues of Chinese state-controlled industrial enterprises fell 39.3% on an annual basis from January to May, compared with a drop of 46.0% in the first four months, statistics from the statistics office showed. .

Private sector profits fell 11% in the first five months, shrinking from the 17.2% drop in January-April.

Commitments to industrial companies increased by 6.6% over one year at the end of May, against an increase of 6.2% at the end of April.

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