Core Insights - The profits of industrial enterprises above designated size in China decreased by 1.1% year-on-year from January to May 2025, with a significant drop of 9.1% in May alone, marking the largest decline since October of the previous year [2][3] Group 1: Profit Trends - The manufacturing sector's profit growth rate increased by 5.4% year-on-year from January to May, outperforming the overall profit growth rate of industrial enterprises by 6.5 percentage points [2] - State-owned enterprises experienced a profit decline of 7.4%, while private enterprises saw a profit increase of 3.4% during the same period [4] Group 2: Factors Influencing Profitability - The decline in profits is attributed to external environmental shocks, continuous decreases in the Producer Price Index (PPI), and insufficient domestic demand [3] - The average collection period for accounts receivable exceeded 70 days, indicating significant asset turnover pressure within the industrial sector [3] Group 3: Impact of Tariffs - State-owned enterprises were more adversely affected by tariffs compared to private enterprises, with state-owned profits declining by 18.1% in May [3][4] - The rising costs due to tariffs have eroded profits, as some enterprises bear the tariff costs themselves, while others face supply chain adjustment costs [6] Group 4: Sector-Specific Performance - The profits of the large equipment manufacturing sector surged by 60%-120%, driven by new production capabilities and supportive policies [2] - Downstream industries such as entertainment products, textiles, and food manufacturing faced significant profit declines of -27.0%, -18.3%, and -7.0% respectively in May [6]

Core Insights - The industrial production in China showed a robust growth of 5.8% year-on-year in May 2025, with a month-on-month increase of 0.61% after seasonal adjustments [1] - The manufacturing sector outperformed the overall industrial growth, achieving a 6.2% increase, while mining and electricity sectors grew by 5.7% and 2.2% respectively [1] - The equipment manufacturing industry demonstrated significant growth, with a 9.0% year-on-year increase, contributing 54.3% to the overall industrial production growth [2] Industrial Performance - In May, 35 out of 41 major industries reported year-on-year growth, resulting in a growth coverage of 85.4% [1] - Among 623 major industrial products, 326 products saw an increase in output, reflecting a growth coverage of 52.3% [1] - Cumulatively, from January to May, the industrial added value increased by 6.3% year-on-year [1] Equipment Manufacturing - The equipment manufacturing sector maintained a strong performance, with all eight sub-sectors reporting growth [2] - The automotive industry experienced a notable increase of 11.6% in added value, accelerating by 2.4 percentage points compared to April [2] - Other sectors such as railway, shipbuilding, aerospace, and electrical machinery also recorded double-digit growth rates [2] Consumer Goods Manufacturing - The consumer goods manufacturing sector grew by 2.5% year-on-year in May, with 10 out of 13 major categories showing growth [2] - Specific industries like cultural and educational products, chemical fibers, and agricultural products saw increases of 10.1%, 6.1%, and 7.6% respectively [2] - Notable product growth included fiber-reinforced plastic products, carbon fibers, and health foods, with increases of 22.6%, 17.9%, and 14.9% respectively [2] Policy Impact - The "Two New" policy continues to stimulate growth in related industries, with significant increases in sectors like motor manufacturing and shipbuilding [3] - The implementation of vehicle replacement subsidies led to an 11.3% increase in automobile production and a 26.0% rise in charging station production [3] - The overall manufacturing output growth rate has shown signs of slowing down, particularly in high-tech and equipment manufacturing sectors [3] Export and Investment Trends - The production and demand for steel have declined, indicating a slowdown in the industrial sector's output [4] - The export delivery value for large-scale industrial enterprises dropped significantly from 7.7% in March to 0.6% in May, highlighting challenges faced by larger firms [4] - Manufacturing investment growth for the first five months of the year was 8.5%, with a monthly growth rate of 7.8% in May, reflecting a slight decline [5][6]

Economic Overview - In May, industrial output and service sector growth rates were around 6%, indicating a GDP growth rate of over 5% for Q2 is likely[1] - Consumer retail sales in May showed a year-on-year increase of 6.5%, driven by policies like "trade-in" and the early start of the "618" shopping festival[5] Consumption Trends - The "618" shopping festival's early launch and "trade-in" policies significantly boosted retail sales, with a month-on-month increase of 0.93%[5] - However, the sustainability of consumer growth is uncertain as reliance on policy support may weaken, and there are signs of demand recovery issues[2] Industrial Production - Industrial value-added growth slowed to 5.8% in May, with significant declines in non-metallic and chemical manufacturing sectors[6] - Export delivery value growth for large enterprises dropped sharply from 7.7% in March to 0.6% in May, indicating a more significant impact from tariffs compared to small enterprises[2] Real Estate Market - Real estate investment, sales, and construction area all saw year-on-year declines in May, with first-tier city housing prices also falling[7] - New policies are being implemented to stabilize the market, including the removal of restrictions in key cities[7] Infrastructure Investment - Infrastructure investment growth rates slightly declined, with broad infrastructure growth at 9.2% and narrow infrastructure growth at 5.1% in May[6] - Despite the slowdown, project approvals by the National Development and Reform Commission remain at historically high levels, suggesting ongoing infrastructure investment intentions[4]