Industrial sector sustains strong momentum

China's industrial sector sustained strong growth momentum in the first five months of 2026, as major industrial companies recorded faster profit growth, buoyed by the robust demand for artificial intelligence-related electronics products, official data released on Saturday showed.

Analysts said the upbeat figures underscore the increasingly stronger role played by new growth drivers in supporting the world's second-largest economy, adding to signs that China remains on a recovery track and is well positioned to meet growth targets.

In the first five months of the year, industrial enterprises with annual main business revenue of at least 20 million yuan ($2.93 million) reported total profits of 3.14 trillion yuan, up 18.8 percent year-on-year, with the growth rate accelerating by 0.6 percentage point from the January-April period, data from the National Bureau of Statistics showed.

In May, profits at major industrial enterprises rose 21.1 percent year-on-year, continuing to expand at a double-digit pace after a 24.7 percent increase in April. "Profits at major industrial firms have continued to post solid gains since the beginning of the year," said Yu Wei­ning, a statistician at the bureau.

Yu attributed the improvement in profits mainly to strong gains in the electronics, high-tech manufacturing and raw materials manufacturing sectors, as well as the continued implementation of proactive macro policies.

The electronics manufacturing sector remained a major growth engine, with profits surging 103.9 percent year-on-year in the first five months and contributing 43.1 percent to the overall profit growth of major industrial enterprises.

"The rapid advance of AI worldwide has spurred a surge in demand for advanced computing and memory chips, providing a strong boost to profit growth in the electronics sector," Yu added.

High-tech manufacturing also maintained solid growth, with profits rising 44.7 percent year-on-year in the first five months.

On Sunday, the China Federation of Logistics and Purchasing released the country's logistics performance data for the January-May period. The total value of social logistics reached 146.6 trillion yuan in the first five months, up 5.2 percent year-on-year.

In May, logistics demand associated with high-tech manufacturing grew 15.1 percent year-on-year, while that for equipment manufacturing rose 9.5 percent.

The strong performance of advanced manufacturing, logistics and AI-related sectors reinforced optimism among global financial institutions about China's growth outlook.

Morgan Stanley last month raised its forecast for China's GDP growth this year to 4.8 percent from 4.7 percent. Robin Xing, chief China economist at Morgan Stanley, said the revision was supported by resilient exports and robust AI- and green-related investment, which are expected to generate positive spillovers leading to industrial upgrade and modernization.

Goldman Sachs also raised China's GDP growth this year to 4.8 percent from 4.3 percent, citing stronger export growth expectations and China's expanding global market share in manufacturing.

Wen Bin, chief economist at China Minsheng Bank, said industrial profits are likely to remain on a recovery track in coming months.

"Improving price conditions, better profit margins, stronger policy support, as well as sustained momentum in emerging industries, will continue to underpin industrial profitability," Wen said.

Despite the strong gains, experts said the recovery remains uneven, as some downstream and traditional industries continue to face profit pressures, pointing to the need for more targeted support.

Luo Zhiheng, chief economist and head of the research institute at Yuekai Securities, said the uneven recovery reflects the broader structural transition underway in China's economy, with new growth drivers becoming increasingly important as property-related sectors remain under pressure.

According to experts, policy support would remain a key pillar. Zhang Di, chief macroeconomic analyst at China Galaxy Securities, said that further support for equipment renewal, infrastructure investment and consumption stimulus would help improve demand recovery in midstream and downstream sectors.