“On one hand you see resilience – the Iran war’s impact on China is very limited. On the other hand you see imbalance – a strong export sector versus a modest domestic demand,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Early signs of strain are emerging, however. China’s factory-gate prices rose in March for the first time in more than three years, signalling that energy-driven cost pressures are seeping into the world’s second-biggest economy and threatening already-thin corporate margins.
On a quarterly basis, the economy expanded 1.3 per cent in January-March, in line with the poll, and compared with 1.2 per cent growth in October-December.
Growth of fixed-asset investment eased to 1.7 per cent in the first quarter from 1.8 per cent in January-February – when infrastructure investment jumped 11.4 per cent year-on-year.
POLICY SUPPORT
China has pledged to step up spending on major infrastructure and public services to help meet the 2026 growth target, the first year of the new five-year plan.
Fiscal expenditure rose 3.6 per cent in January–February, picking up from a 1 per cent increase in 2025 and adding to signs of stronger fiscal support. Beijing has set a budget deficit of around 4 per cent of GDP for 2026 and lined up heavy bond issuance to support growth, while the central bank has pledged to keep policy accommodative despite limited room to cut rates as inflation edges higher.
China’s Politburo, a top decision-making body of the ruling Communist Party, is expected to meet later this month to assess the economic outlook.
Policymakers have acknowledged an “acute” imbalance between strong supply and weak demand, and have vowed to “significantly” lift household consumption’s share of the economy over the next five years, though no specific target has been set.
Analysts polled by Reuters expect the central bank to keep the benchmark one-year loan prime rate unchanged through the end of 2026, while cutting banks’ weighted-average reserve requirement ratio by 20 basis points in the third quarter of the year.
