China’s industrial profits rose sharply in the first two months of 2026, official data showed Friday, offering fresh signs of resilience in the world’s second-largest economy even as surging oil prices and geopolitical tensions cloud the outlook.
Profits at industrial firms above designated size climbed 15.2 percent year-on-year in January and February to 1.02 trillion yuan (about US$156.2 billion), according to data from China’s National Bureau of Statistics (NBS). The gain extended a strong rebound from 5.3 percent growth in December and marked one of the strongest starts to the year for the sector in recent months.
The upbeat figures suggest that Beijing’s efforts to steady industrial activity and curb the fallout from overcapacity, weak domestic demand and prolonged deflationary pressure may be beginning to bear fruit.
NBS statistician Yu Weining attributed the rise in profitability to stronger factory activity and improving product prices during the first two months of the year, as manufacturers benefited from a modest pickup in production and better margins in some upstream industries.
The strongest gains came from high-tech manufacturing, where profits surged as demand for advanced products such as semiconductors and unmanned aerial vehicles remained robust. More broadly, industrial output also rose 6.3 percent in January-February from a year earlier, while manufacturing investment and export-linked production helped support momentum at the start of the year.
Raw material producers also posted strong earnings. Profits in the non-ferrous metals sector jumped 150 percent, while the chemical products industry recorded a 35.9 percent rise, reflecting stronger pricing and demand conditions. At the same time, some parts of the energy complex remained under pressure, with profits in petroleum and natural gas extraction falling 16.8 percent, highlighting uneven performance across sectors.
Despite the strong headline number, Chinese officials and analysts cautioned that the recovery remains fragile.
Without directly naming the conflict in the Middle East, the NBS warned that “escalating geopolitical tensions” could generate spillover risks for growth, while also noting that the recovery remained unbalanced across industries and ownership groups. Foreign-invested firms, for example, saw profits decline 3.8 percent, even as private enterprises posted a much stronger 37.2 percent increase.
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The warning comes as Beijing tries to shield its economy from the fallout of the Iran war and the disruption to oil shipments through the Strait of Hormuz, one of the world’s most important energy chokepoints. China, the world’s largest crude importer, has moved to contain the impact of higher oil prices, though analysts say prolonged energy volatility could still squeeze margins for manufacturers and weaken demand at home and abroad.
That risk is already beginning to show in factory surveys. China’s official manufacturing purchasing managers’ index returned to expansion in March, rising to 50.4, its highest level in a year, but raw material purchase prices also jumped sharply, signalling that energy and commodity costs are feeding into industrial supply chains.
For Beijing, the latest profit data offer some breathing room at a time when policymakers are trying to balance short-term support for growth with longer-term efforts to restructure the economy.
China’s industrial sector has been one of the main pillars of growth as weak consumer spending and a fragile property market continue to weigh on the broader recovery. But economists warn that if the oil shock persists and external demand softens, the recent rebound in profits could prove difficult to sustain.
For now, the data suggest China’s factories entered 2026 on firmer footing. Whether that momentum holds may depend less on domestic policy than on how quickly global energy and trade routes stabilize.
