China's large steel plants saw improved profits and narrowed losses in the first five months of this year thanks to their destocking efforts, according to a national steel association.

Major iron and steel enterprises raked in 8.736 billion yuan (1.31 billion U.S. dollars) in the Jan-May period, up over 700 percent year on year while fewer firms reported losses, according to the China Iron and Steel Association (CISA).

The improvement is a result of the firms' rational response to overcapacity in the sector, as most large iron and steel plants reduced their output in the first five months and tried to stabilize product prices, CISA head Liu Zhenjiang said.

Total steel production in the first five months of this year dropped 1.4 percent year on year, data from the National Bureau of Statistics showed.

China, the world's largest steel producer and consumer, plans to cut steel capacity by about 10 percent -- as much as 150 million tonnes of steel -- in the next few years, with funds set aside to help redundant workers.

• [Editor:penny]