* China Jan-Feb industrial profits +10.2% y/y vs -2.3% in 2023
* Positive profits data join upbeat indicators released earlier
* Property sluggishness remains a drag on overall economy
BEIJING, March 27 (Reuters) - China's industrial firms posted higher profits in the opening months of the year, official data showed on Wednesday, reinforcing signs that an economic recovery was gaining traction despite persistent sluggishness in the property sector.
Profits at China's industrial firms jumped 10.2% in the first two months from a year earlier, National Bureau of Statistics (NBS) data showed, following a 2.3% profit decline for the whole of 2023.
The surge comes on the heels of upbeat indicators earlier this month that suggest a stabilization in Asia's largest economy. But overall gains remain tempered by the persistent fragility in China's property market, pointing to a divergence in the country's post-pandemic recovery.
"After an upside surprise to industrial production to start the year, a further recovery of industrial profits sends another signal that we are indeed seeing a gradual recovery after a bottoming out last year," said Lynn Song, chief economist for Greater China at ING.
"If the recovery of manufacturing continues, it would contribute toward reaching the 2024 growth target, but more supportive policies are still needed to sustain the momentum and recovery."
State-owned firms recorded a 0.5% rise in earnings in January-February, foreign firms saw a 31.2% gain while private-sector companies booked a 12.7% increase, the data showed.
Zhou Maohua, an analyst at China Everbright Bank, expects continued gains in industrial earnings, but said their prospects could be dented by an uncertain global demand outlook, price fluctuations in energy and other commodities and supply chain disruptions from geopolitical conflicts.
A broad-based rebound in China's domestic demand also remains to be seen.
Earlier in March, Chinese electric vehicle battery giant CATL posted its first drop in quarterly earnings since the second quarter of 2022.
In the face of lingering economic weakness, a deputy central bank chief last week assured markets of policy options at its disposal, including cuts in banks' reserve requirement ratios (RRR).
The central bank announced the biggest RRR reduction in two years in January.
China's statistics bureau publishes combined data for the first two months to sort out distortions due to the varied timing of the Lunar New Year.
Industrial profit numbers cover firms with annual revenues of at least 20 million yuan ($2.78 million) from their main operations.
($1 = 7.1986 yuan) (Reporting by Qiaoyi Li and Ryan Woo. Editing by Sam Holmes and Christopher Cushing.)
