China industrial profits surge 15% to start year, but oil price shock threatens outlook

Chinese industrial firms experienced a significant increase in profits during the first two months of this year, a result of ongoing efforts to address industrial overcapacity and weak consumer demand.

According to data from the National Bureau of Statistics, industrial profits surged by 15.2% year-over-year in the January-February period, continuing a strong rebound from a 5.3% increase in December.

NBS chief statistician Yu Weining attributed this growth to heightened factory activity and rising product prices during the first two months of the year.

The high-tech manufacturing sector led the way in profit gains, with a remarkable 58.7% increase from the previous year, driven by strong earnings from companies specializing in unmanned aerial vehicles and semiconductors.

In addition, raw material producers such as non-ferrous metals and chemical manufacturers also reported substantial profit growth, with increases of 148.2% and 35.9% respectively.

While not directly addressing the Middle East conflict, Yu warned of potential spillover risks from escalating geopolitical tensions that could impact China’s economic growth outlook, especially as sector recoveries remain uneven.

In 2025, China’s industrial profits for the entire year rose by 0.6% compared to the previous year, ending three consecutive years of decline as officials focused on reducing price competition and boosting exports to meet international demand.

China has been managing the fallout from disruptions in oil shipments caused by U.S.-Israeli actions against Iran, which led to the closure of the critical Strait of Hormuz. In response to rising global oil prices, China adjusted retail gasoline and diesel prices but implemented only a partial increase to lessen the impact on consumers.

Despite the challenges, China is expected to weather the impact of surging energy prices better than many other countries due to its significant oil reserves and investments in alternative energy sources. Notably, Iran has continued to supply China with millions of barrels of crude oil since the conflict erupted.

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