BEIJING: Profits of China's state-owned non-financial firms fell 3.3 percent in the first five months

from a year ago, official data showed, moderating from steeper declines earlier this year.

The companies made a combined profit of 923.8 billion yuan ($148.8 billion) in January-to-May, the Ministry of Finance said in a statement on its website on Friday.

Profits were down 5.7 percent in the first four months, down 8 percent in the first three and down 21.5 percent in January-to-February.

The improved performance in January-to-May showed recent government policy measures to support economic growth have started "taking effect", the ministry said.

A break-down showed profits of firms owned by the central government fell 5 percent and profits of firms owned by local governments rose 2.1 percent.

Companies in the transportation, electronics, chemical and power sectors reported higher profits, while coal, steel and non-ferrous metal sectors suffered losses, the ministry said without giving specifics.

But state firms in coal, steel and non-ferrous metal sectors made a combined profit of 2.7 billion yuan in May alone, jumping 254.8 percent from April.

The country's three oil majors China National Petroleum Corp. (CNPC), Sinopec Group and China National Offshore Oil Corp made a combined profit of 30.7 billion yuan in May, up 32.8 percent

from April, the ministry said without elaborating.

The central bank has cut interest rates and bank reserve requirements to lower borrowing costs and encourage more lending, while the government is stepping up fiscal spending.

China's annual economic growth slowed to a six-year-low of 7 percent in the first quarter, weighed down by a cooling property sector. Recent data showed a further loss of momentum heading

into the second quarter.

Annual profit growth of China's state-owned firms slowed to 3.4 percent in 2014 from 5.9 percent the previous year as factories struggled to cope with falling prices amid an economic slowdown.

Meanwhile, China's central bank and commercial banks bought a net $5.2 billion in foreign exchange

in May, official data showed, indicating small money inflows, but analysts still expect further policy easing to support the slowing economy.

Net currency purchases were 32.2 billion yuan ($5.19 billion)in May, according to Reuters calculations based on central bank data released on Friday.

That followed net buying of 32.4 billion yuan in April, reversing net selling of 156.5 billion yuan in March.

Data published by the State Administration of Foreign Exchange on Thursday showed that banks alone bought a net $1.3 billion in foreign exchange settlements in May, reversing net

sales of $17.3 billion in April.

Concerns over China's economic slowdown and possible interest rate rises by the US Federal Reserve had led to a wave of capital outflows, although Chinese officials said the flows were "normal" and should not be considered as capital flight.

Recent outflows had put pressure on the central bank to cut banks' reserve requirement to spur money supply at a time when economic growth is grinding towards a 25-year low this year.

That was on top of three interest rate cuts since November.

China is looking for new ways to lower stubbornly high long-term borrowing costs and stop the fruits of its looser monetary policy being pumped into speculative plays instead of supporting its economy, policy insiders say.

"Despite a jump in money rates this week, it is not difficult to borrow in the market," said a trader at an Asian bank in Shanghai.

"While the market is mixed on when the PBOC will make another monetary easing move, market conditions may allow it to postpone the next step, although the central bank tends to surprise."

Analysts attributed easing outflows to uncertainties about the US economy and the timing and speed of the Fed's expected rate increases — reflected in a pull-back in the dollar against major currencies, rather than any improvements in China's economy.

The dollar index against a basket of major currencies has lost about 6 percent from a peak in March.

"Capital outflows may reappear if the dollar regains steam," said Nie Wen, an economist at Hwabao Trust in Shanghai.

"China's economy is showing some signs of stabilization but second-quarter growth is likely to dip below 7 percent."

Most analysts expect the central bank to loosen policy further to support the economy and help local governments to swap high-interest debt for bonds with lower yields.