Oil refining helps China industrial profits rebound in May

China’s industrial profits rebounded in May, pointing to a change in fortunes for sectors such as oil refining following the devastation wrought by the coronavirus lockdown earlier in the year.

Profits at large-scale industrial enterprises rose 6 per cent year on year in May, after shrinking 4.3 per cent in April, marking the first return to growth this year.

Economic activity has picked up as coronavirus lockdowns have lifted in most of the country, but China still faces headwinds from the sharp downturn in the global economy as well as in domestic consumption.

“Market demand remains relatively weak amid the epidemic, and the sustainability of the profit recovery needs further examination,” said Zhu Hong, senior statistician at China’s National Statistics Bureau in a statement.

Authorities attributed the May recovery to an improving picture in oil refining, energy, chemicals and iron and steel. Oil prices have dipped this year and the statistics bureau said lower costs and rising demand had benefited these firms — oil refinery profits were up 8.9 per cent from a year earlier. 

However, the May rise failed to offset the very poor performance at start off the year. Profits at China’s major industrial firms dropped 19.3 per cent year on year in the first five months of 2020 due to the impact of Covid-19 impact, the official data showed.

China started going into lockdown at the end of January and while restrictions were lifted across much of the country two months later, it has taken much longer to get back to full production with workers continuing to be subject to quarantine restrictions and overseas supply chains badly affected.

Certain sectors have been worse hit than others. Mining industry profits in the first five months of the year were down 43.6 per cent on year, manufacturing profits fell 16.6 per cent, and private enterprise profits shrank 11 per cent during the same period, China’s statistics bureau said. 

Separate data released over the weekend showed tourist trips and spending fell sharply from a year earlier during the three-day dragon boat festival that ended on Saturday.

Tourism spending over the period was 69 per cent lower than in the previous year at Rmb12.3bn ($1.7bn). 

China shuts down for several holiday breaks during the year during which companies are generally required to give their employees time off. The holidays are traditionally a high point for consumer spending and travel. Tourism contributed more than 11 per cent to China’s economy in 2019. 

However, the number of tourists who visited establishments during the recent holiday fell by roughly half from a year earlier to 49m, data from the culture ministry showed. 

During China’s five day May Day break this year, 115m people made domestic tourism trips, contributing Rmb47.6bn in tourism revenue. The transport ministry reported 79m trips during the dragon boat festival, without providing data for last year.

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