MACRO ECONOMIC REPORT

Q1 2026
China Economic Report

15th FYP Debut: Strong Exports, Moderate Domestic Demand,
New Quality Productive Forces Rising

Reporting Period: Q1 2026 (Jan–Mar)
Data as of: April 2026  |  Published: May 2026
Sources: NBS  |  PBoC  |  General Administration of Customs  |  Wind
Executive Summary

Key Indicators: A Strong Start for High-Quality Development

5.0%
GDP YoY Growth
Beat consensus by 0.1pp
▲
14.7%
Export Growth (USD)
Fastest quarterly pace in 5 yrs
▲
1.7%
Fixed Asset Investment
Turned positive from −3.8% in 2025
▲
2.4%
Retail Sales YoY
Moderate recovery, weak momentum
→
5.3%
Surveyed Unemployment Rate
Flat YoY, March edged up to 5.4%
→

Q1 2026 GDP grew 5.0% YoY, a solid start to the 15th Five-Year Plan. Exports (+14.7%) and infrastructure investment (+8.9%) were the twin engines; FAI turned positive (+1.7%). Retail sales showed mild recovery (+2.4%), but the household consumption propensity fell to a three-year low (62.2%). The unemployment rate was broadly stable (5.3%) with marginal March pressure. PPI turned positive in March (+0.5%), ending 41 months of decline. The core question for the year ahead: can domestic demand take the baton from exports?

Sources: NBS, Wind  |  Data as of: April 2026
Contents

Report Structure

01
Macro Economy
GDP beat consensus; tertiary sector 63.2%
02
Investment Turns Positive
Infrastructure + equipment renewal as twin drivers
03
Exports: Resilient & Strong
Fastest quarterly growth in five years
04
Consumption: Mild Recovery
Confidence awaits a catalyst
05
Inflation: Deflation Eases
PPI turns positive in historic shift
06
Real Estate: L-Shaped Bottom
Tier-1 cities show early stabilization
07
Industry & New Quality Forces
Industry beats expectations; new forces rising
08
Services: Structural Upgrade
Old-vs-new divergence persists
09
Employment & Income
Stable overall; distribution improving
10
Policy Environment
Targeted easing; front-loaded fiscal expansion
Q1 2026 China Economic Report
01

Macro Economy: GDP Beat Consensus, Tertiary Sector Contributed 63.2%

  • Q1 2026 GDP grew 5.0% YoY, beating consensus (4.9%) and accelerating 0.5pp from Q4 2025, marking a solid start to the 15th Five-Year Plan
  • Nominal GDP rose 4.94% YoY (Q4 2025: +3.85%), with price drag significantly easing; seasonally adjusted QoQ growth reached 1.3%
  • The tertiary sector contributed 63.2% of GDP growth; industrial value-added (+6.1%) outpaced services (+5.2%), reflecting internal divergence
Sources: NBS, Wind
02

Investment Turns Positive: Infrastructure & Equipment Renewal as Twin Drivers

  • FAI reached RMB 10.27 trillion, +1.7% YoY (2025 full year: −3.8% → +1.7%), a 5.5pp swing. Infrastructure investment (+8.9%) was the core driver
  • Manufacturing investment grew 4.1% (accelerating to +4.9% in March); equipment & tool procurement surged 13.9%, reflecting sustained "Two New" policy effects
  • Real estate development investment (−11.2%) remains the largest drag, but the decline narrowed 6pp from the 2025 full-year rate (−17.2%)
Sources: NBS, Wind
03

Exports: Resilient & Strong, Fastest Quarterly Growth in Five Years

  • Total goods trade reached RMB 11.84 trillion (+15.0%), surpassing RMB 11 trillion for the first time in a Q1. Exports (USD) rose 14.7% YoY
  • Three key drivers: global AI investment wave boosting semiconductor demand; China's manufacturing energy cost advantage; trade partner diversification (Belt & Road share: 51.2%)
  • Export structure upgrading: NEVs +77.5%, lithium batteries +50.4%, 3D printers +119%, mechanical & electrical products +18.3%
Sources: NBS, Wind
04

Consumption: Mild Recovery, Confidence Awaits a Catalyst

  • Total retail sales reached RMB 12.77 trillion, +2.4% YoY (+0.7pp from Q4). Services retail sales (+5.5%) continued to outpace goods retail (+2.2%)
  • Online penetration rose further (online retail +8.0%), but the household consumption propensity fell to 62.2% (three-year low), reflecting stronger precautionary savings motives
  • Extreme category divergence: communication equipment (+20.8%) and gold & jewelry (+12.6%) were standouts; autos (−9.1% to −11.8%) weighed heavily, reflecting subsidy phase-out effects
Sources: NBS, Wind
05

Inflation: Deflation Pressure Eases as PPI Turns Positive

  • CPI rose 0.9% YTD YoY (+0.4pp from Q4), with March CPI reaching +1.0%. Core CPI (excl. food & energy) averaged +1.2%, indicating moderate reflation
  • PPI turned positive in March at +0.5% YoY, ending 41 consecutive months of decline dating back to October 2022—a landmark shift signaling the retreat of industrial deflation
  • The PPI turnaround supports corporate revenue and profit recovery, though the rebound is partly driven by imported factors (Middle East geopolitics pushing up oil prices); endogenous pricing power still needs strengthening
Sources: NBS, Wind
06

Real Estate: L-Shaped Bottom, Tier-1 Cities Show Early Stabilization

  • Floor space sold fell 10.4% YoY, sales value declined 16.7%—"trading volume for price" remains the dominant theme. March average selling price rose 0.7% MoM, a tentative stabilization signal
  • Tier-1 cities are stabilizing first: cities with rising new home prices increased from 4 in January to 14 in March. Beijing existing home transactions hit 19,886 units (+144.6% MoM); Shanghai exceeded 30,000 units, a five-year high
  • The supply side remains in deep contraction: development investment −11.2%, new starts −20.3%, completions −25.0%. Unsold inventory rose to 786 million m², keeping destocking pressure elevated
Sources: NBS, Wind
07

Industry & New Quality Productive Forces: Beating Expectations

  • Industrial value-added rose 6.1% YoY (+1.1pp from Q4), with the March manufacturing PMI at 50.4, returning to expansion territory. Q1 industrial profits grew 15.5%
  • High-tech manufacturing (+12.5%, nearly double the headline rate) and equipment manufacturing (+8.9%) show new quality productive forces transitioning from policy concept to real growth contribution
  • Integrated circuits +49.4%, 3D printing +54.0%, lithium batteries +40.8%, industrial robots +33.2%, wind turbines +30.1%—AI computing demand and green transition as dual catalysts
Sources: NBS, Wind
08

Services: Structural Upgrade Underway

  • The tertiary sector grew 5.2%, contributing 63.2% of GDP. Modern services—IT services, finance—grew faster than traditional sectors
  • High-tech services investment rose 12.3%, corroborating the high-growth narrative in IT and R&D services
  • Wholesale & retail, accommodation & catering grew at a more moderate pace. The "old-vs-new divergence" within services is pronounced
Sources: NBS, Wind
09

Employment & Income: Stable Overall, Distribution Improving

  • The surveyed urban unemployment rate averaged 5.3% in Q1 (unchanged YoY), though March edged up to 5.4%, indicating marginal pressure
  • Per capita disposable income reached RMB 12,782, +4.9% nominal, +4.0% real (trailing GDP growth by 0.5pp). Median growth (+5.0%) outpaced the mean (+4.9%)
  • The urban-rural income ratio narrowed to 2.23:1 (from 2.27:1). Property income grew only 1.6%, the weakest of four income sources, reflecting declining deposit rates and weak real estate asset prices
Sources: NBS, Wind
10

Policy Environment: Targeted Monetary Easing, Front-Loaded Fiscal Expansion

  • The PBoC Q1 Monetary Policy Report maintained a "moderately accommodative" stance but dropped the "RRR and policy rate cuts" phrase. LPR unchanged for 12 consecutive months (1Y 3.00%, 5Y+ 3.50%)
  • Structural policies deployed: relending and rediscount rates cut 0.25pp; additional RMB 500 billion in agricultural and small-business relending; a dedicated RMB 1 trillion private enterprise relending facility
  • Fiscal policy front-loaded: ultra-long special government bonds + special-purpose bonds jointly drove infrastructure (+8.9%). The April Politburo meeting outlined "Six Networks" construction
Sources: NBS, Wind
11

Risks & Outlook: Tariff Uncertainty and the Domestic Demand Handoff

  • External risks: US-China trade tensions evolving; further tariff escalation would hit exports directly. Middle East geopolitical conflict pushing up oil prices, amplifying imported inflation risk
  • Domestic challenges: household consumption propensity at a three-year low; consumption lacks self-sustaining momentum; the "strong supply, weak demand" imbalance remains acute
  • Baseline scenario (no major tariff escalation): Q2 GDP projected at 4.8%–5.0%; export growth moderating to single digits; retail sales recovering to 3.0%–4.0% on holiday season boost
Sources: NBS, Wind

From Export-Driven to Domestic Demand-Led

Achievements

GDP grew 5.0%, beating expectations and delivering a solid start to the 15th Five-Year Plan. New quality productive forces are accelerating as a new growth engine. PPI turning positive marks a meaningful easing of deflationary pressure.

Challenges

The structural "strong external, moderate domestic" imbalance persists: export strength faces tariff and geopolitical headwinds; consumption and real estate lack self-sustaining momentum; domestic demand's engine remains weak; household consumption propensity fell to a three-year low.

Outlook

The policy toolkit remains ample. The central question is whether the economy can smoothly transition from export-driven to domestic demand-led growth—hinging on whether structural reforms can meaningfully boost household confidence and corporate investment appetite.

Sources: NBS  |  PBoC  |  General Administration of Customs  |  Wind