BEIJING: China’s industrial profits swung back into positive territory in April while growth over the first four months held steady, official data showed on Monday, suggesting policies to bolster the economy were starting to take effect.

Profits at China’s industrial firms rose 4.3% over January to April from a year earlier, according to data from the National Bureau of Statistics (NBS), unchanged from a 4.3% increase in the first quarter.

In April, profits rose 4.0%, after a 3.5% slide in March.

The improvement indicates “a rebound in market demand, macro policy support and last year’s low base”, said Zhou Maohua, a macroeconomic researcher at China Everbright Bank.

The pickup in earnings followed export-led growth in factory output over the past month, although retail sales unexpectedly slowed, suggesting a still uneven recovery.

“Domestic effective demand remains insufficient while the external environment is still complicated and severe,” NBS statistician Wei Ning said in a separate statement.

Profit woes loom large even for China’s economically important electric vehicle sector, as slowing demand and a brutal price war in the world’s largest auto market weigh on domestic automakers.

The EV sector accounted for 23.5% of new car sales in China in 2023 when the auto manufacturing sector made up 8% of China’s GDP in revenue terms, industry data showed.

Li Auto, one of the few profitable Chinese EV makers, posted a 37% drop in first-quarter profit, missing estimates.

Earnings erosion against signs of accelerating industrial output and an export rebound expose the frailty of domestic demand, leaving the door open for more policy support for the private sector that employs tens of millions in China.