China industrial profits quicken in May, seen fading as finance costs rise

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A worker checks the labels on the steel wire robs at the Dongbei Special Steel Group plant on May 15, 2017 in Dalian, Liaoning Province of China.

For the first five months of the year, profits reached 2.9 trillion yuan, up 22.7 percent from the same period of last year and lower than the 24.4 percent annual growth in the January-April period.

The upbeat growth of industrial earnings in May was largely driven bycontinued demand for iron ore and other commodities used to feed a year-long construction boom.

An infrastructure spending spree in China has helped spur sales and prices of building materials, reviving profits for long-ailing “smokestack” industries such as steel mills and smelters.

“The quickened growth of China’s industrial profits was partly due to a low-base effect at the same time a year earlier, which marked the second slowest growth over the course of last year,” stats bureau official He Ping said in a statement accompanying the data.

He added that profit growth in industries such autos, power and tobacco was expected to rebound.

Operating costs as a proportion of operating revenue rose on an annual basis for a third consecutive month in May, which He said needed to be closely watched.