China Economic Quarterly Q1 2026

China economy update: Key takeaways

• China met its 2025 growth target, underscoring its role as a source of certainty and stability in a volatile global environment, even as momentum softened toward year-end. Services and external demand played an increasingly important role in supporting growth, highlighting a continued shift in the growth mix.
• High-tech and advanced manufacturing investment remained a bright spot, continuing to support economic upgrading. Overall investment moderated in the second half, however, as the property downturn deepened.
• Consumption recovery was supported earlier in the year by trade-in programmes that boosted goods spending, while services outperformed, pointing to continued shifts in household spending patterns. However, the recovery remained uneven as the effects of policy support faded toward year-end.
• Government bonds and direct financing played a larger role in supporting aggregate social financing, even as overall credit demand remained soft despite ample liquidity.
• Export diversification and higher-value shipments helped sustain trade growth, while FDI remained more resilient in services and high-tech segments despite weaker aggregate inflows.
   

China economic outlook 2026

• China’s 2026 outlook points to slower but more reform-driven growth. The new target range suggests policymakers are willing to accept softer headline growth in order to advance structural adjustment, while reinforcing China’s role as a source of relative certainty in a volatile global environment.
• Policy settings appear deliberately calibrated to preserve headroom. Rather than front-loading stimulus, policymakers are retaining flexibility to scale up support as external and domestic conditions evolve.
• Policy is shifting from short-term consumption support to a structural approach centred on “investing in people”. Strengthening education, healthcare, and social security is intended to rebuild household confidence and aligns with the recent “Export to China” campaign.
• Private and foreign capital are likely to play a larger role in the next phase of growth. This is supported by stronger policy backing for strategic sectors, expanded direct financing, and targeted tools—including guarantee and risk-sharing mechanisms—to ease financing constraints and mobilise private investment.
• Structural reform will increasingly shape the outlook. Building a unified national market will help unlock more effective investment in strategic industries.