China’s economy builds early momentum in 2026
· Michael West
China’s factory output growth quickened in January-February while retail sales rebounded, in a steady start to the year for an economy confronting multiple challenges including the fallout from the US-Israeli war against Iran.
Visit djcc.club for more information.
Industrial output rose 6.3 per cent from the same period in the previous year, National Bureau of Statistics data showed on Monday, up from the 5.2 per cent growth clocked in December.
It beat a five per cent expansion forecast in a Reuters poll and marked the quickest growth since September last year.
The figures follow data showing China’s exports blew past forecasts in the first two months, powered by surging AI-related technology demand that also lifted upstream manufacturing.
China’s exports exceeded forecasts, driven by a surge in demand for AI-related technology. (EPA PHOTO)“While risks to the outlook have increased amid geopolitical tensions and disruptions to global trade and energy markets, the latest figures indicate that China entered the year with a firmer growth footing than previously thought,” said Hao Zhou, chief economist at Guotai Junan International.
Retail sales, a gauge of consumption, jumped 2.8 per cent, quickening from the 0.9 per cent pace in December for their biggest gain since October last year. Analysts had expected a 2.5 per cent growth.
The strong impetus was driven in part by the country’s longest Lunar New Year holiday in February. The festivities helped boost total tourism spending by almost 19 per cent from the same holiday period last year, which was one day shorter.
But domestic tourism spending per trip dipped 0.2 per cent, suggesting consumers remain cautious.
Data from earlier last week, for instance, showed passenger vehicle sales at home tumbled 26 per cent year-on-year in January-February, hurt by the end of a tax break and scaled-back government subsidies for electric vehicles.
China combines January and February data releases to smooth out distortions from the festival holidays, which can fall in either month.
Monday’s data provided another encouraging sign for policymakers as an unexpected upturn in investment took some of the sting off the challenge of a protracted downturn in the critical property sector.
Fixed asset investment, which includes property and infrastructure investment, expanded 1.8 per cent in the first two months, versus expectations for a 2.1 per cent drop. It fell 3.8 per cent in 2025, the first annual drop in about three decades.
Infrastructure investment, in particular, grew 11.4 per cent, as policy support including a new financing tool from banks to fund key investment projects started to take effect.
The overall data, while showing some positive momentum, still suggest a wide gap between robust external demand and sluggish household consumption that analysts warn could hamper China’s long-term growth prospects. Last week’s lending data pointed to a continued slump in household borrowing.
Also, worryingly for income generation, the survey-based nationwide jobless rate rose to 5.3 per cent in the first two months from December’s 5.1 per cent, the NBS data showed.
“It cannot be ruled out that domestic demand data in March will still face downward pressure,” said Zhaopeng Xing, senior China strategist at ANZ, though he added that the overall data do not support an interest rate cut in the near term.
At the annual parliament meeting that closed last week, policymakers set this year’s economic growth target at 4.5 per cent-5 per cent, down from last year’s “around five per cent”.
The target was met in 2025 largely on the back of a record trade surplus of just over $US1 trillion ($A1.4 trillion), deepening unease among China’s trading partners.