A man shops at an H&M clothing store in Hong Kong on Saturday. H&M products were missing from major Chinese e-commerce platforms following calls by state media for a boycott over the Swedish retailer’s decision to stop buying cotton from Xinjiang. Associated Press

Annual profits at China’s industrial firms surged in the first two months of 2021, highlighting a rebound in the country’s manufacturing sector and a broad revival in economic activity from the coronavirus crisis early last year.

Profits stood at 1.114 trillion yuan ($170.31 billion) in the first two months of 2021, up 179% from the same period last year when the COVID-19 pandemic paralysed economic activity, data from the National Bureau of Statistics (NBS) showed on Saturday.

They were also up 72.1% from the 2019 levels, bringing the two-year average growth to 31.2%, according to NBS. Profits had risen 20.1% in December.

The figures combine data for January and February to exclude distortions caused by the week-long Lunar New Year, which fell in February in 2021.

“Due to a combination of factors such as stabilising domestic and foreign demand, low bases and the ‘stay put’ initiative over the Lunar New Year, growth in industrial production and sales quickened, the rebound in corporate revenues and profits accelerated and profitability has recovered significantly,” Zhu Hong, senior statistician of NBS, said in a statement accompanying the data.

Millions of workers who normally travel home over the Lunar New Year holiday had stayed put this year due to COVID-19 fears. That kept factories humming over the period. Margins in the raw material manufacturing sector rose 346% from a year earlier, data showed, as factory-gate prices accelerated at their fastest pace in more than two years.

China’s industrial output surged in the first two months of the year, while exports, a major growth driver for China after the pandemic shock, rose at a record pace in February.

China managed to contain the COVID-19 pandemic before many of its peers last year, making it the only major economy to have posted full-year growth in 2020, with an expansion of 2.3%.

Beijing has set a modest annual economic growth target at above 6% this year, well below analyst expectations, with Chinese Premier Li Keqiang saying that setting hugely different growth targets from year to year would “disturb market expectations.

Liabilities at industrial firms were up 9.4% year-on-year at end-February, versus 6.1% growth as of end-2020.

The industrial profit data covers large firms with annual revenues of over 20 million yuan from their main operations.

China’s factory and retail sector activity surged in the first two months of the year, beating expectations, as the economy consolidated its brisk recovery from the coronavirus paralysis of early 2020.

While the impressive set of numbers released recently were heavily skewed by the very low base from last year’s massive slump, analysts said they nonetheless showed China’s strong rebound remained intact.

“We have a positive outlook for exports and manufacturing investment this year,” said Louis Kuijs, head of Asia economics and Oxford Economics. “And we expect household consumption to become a key driver of growth from Q2 onwards as confidence improves and the government’s call to reduce travel is toned down.”

Chinese lenders’ profit: Three of China’s largest lenders on Friday booked a jump in fourth-quarter net profit of well over 40%, the first green shoots since the global COVID pandemic battered borrowers last year.

Net interest margins remained stable for all three, as analysts predict a positive turn in the key gauge of profitability this year.

During the first three quarters of 2020, Chinese lenders made hefty loan-loss provisions as Beijing urged the sector to step up lending to pandemic-hit sectors, but many have begun to see improvements in earnings in tandem with an economic recovery and are expected to continue to do so throughout the year.

“Banks’ average net interest margin is unlikely to narrow further from the 2020 level of 2.1% because of the central bank’s gradual return to a neutral monetary policy stance,” said Moody’s in a March China Banking outlook.

Industrial and Commercial Bank of China (ICBC) and Bank of Communications Co Ltd (BoCom), , booked a jump in fourth-quarter net profit on Friday of well over 40%.

Meanwhile, China Construction Bank Corp (CCB) logged a 58% surge in fourth-quarter net profit.

It was the first profit gain in three quarters for all three lenders.

For ICBC, profit for the full year increased 1.2% to 315.9 billion yuan, while at BoCom, it climbed 1.3% to 78.3 billion yuan. CCB profit over the same period increased 1.6% to 271.1 billion yuan. All three lenders surpassed Refinitive estimates.

For all lenders, the net interest margin (NIM) - a key guage of bank profitability - stayed mostly steady. Non-performing loan ratios remained flat from BoCom and ICBC, but rose slightly for CCB from 1.53% at the end of September last year to 1.56% end 2020.