China's industrial profits growth slowed down significantly in May, despite a rise in exports, according to data released by the National Bureau of Statistics. The profits of major state-owned enterprises (SOEs) grew by just 5.4% year-on-year, down from 15.3% in April and below market expectations.
The slowdown in industrial profits is attributed to weak domestic demand, which has been a recurring theme in China's economic growth story. Despite a pick-up in exports, the country's factories are still struggling to sustain production due to lack of orders from local consumers.
According to the data, industrial revenues grew by 9% year-on-year in May, while costs increased by 7.3%. The profit margin for state-owned enterprises (SOEs) narrowed to 6.1%, down from 8.2% in April.
The slowdown in China's industrial profits has implications for the global economy, particularly for countries that rely heavily on exports of manufactured goods. As the UK is one of the major trading partners of China, a prolonged slowdown could impact British businesses and households that trade with the country.
Meanwhile, the Bank of England (BoE) is expected to keep an eye on the developments in China, given its significance for global economic growth. The BoE has already warned about the risks posed by a slowing global economy to UK's own growth prospects.