The central bank released its 2026 first-quarter monetary policy implementation report on May 11. The report indicates that recent geopolitical events in the Middle East have driven up international crude oil and some commodity prices, contributing to the current recovery in China's price indicators. However, the impact of externally imported inflation on the domestic economic operation requires close attention.
The report points out that in the first quarter of this year, the external situation was complex and volatile. Macroeconomic policies became more proactive, and the national economy started strongly, with Gross Domestic Product (GDP) growing by 5% year-on-year. Production and supply growth accelerated, market demand continued to improve, prices rose moderately, and development resilience and vitality were further demonstrated, laying a solid foundation for a good start to the "15th Five-Year Plan" period. Favorable conditions for consolidating the steady and positive economic trend remain ample.
First, economic sentiment improved marginally, with momentum for high-quality development strengthening. In March, the manufacturing Purchasing Managers' Index (PMI) was 50.4%, and the services business activity index was 50.2%, up 1.4 and 0.5 percentage points respectively from the previous month, indicating a gradual recovery in market confidence. In the first quarter, value-added of equipment manufacturing and high-tech manufacturing increased by 8.9% and 12.5% year-on-year, respectively, outpacing the growth of total industrial value-added above designated size by 2.8 and 6.4 percentage points. Output of 3D printing equipment, lithium-ion batteries, and industrial robots increased by 54.0%, 40.8%, and 33.2% year-on-year, respectively, showing accelerated growth in new quality productive forces.
Second, effective demand showed signs of warming, with the "troika" of consumption, investment, and exports working in synergy. From the consumption perspective, total retail sales of consumer goods in the first quarter increased by 2.4% year-on-year, accelerating by 0.7 percentage points from the fourth quarter of the previous year. Service consumption growth was significantly higher than goods consumption, with retail sales in cultural, sports, leisure services, and travel consulting and leasing services achieving double-digit growth. From the investment perspective, fixed-asset investment in the first quarter shifted from a 3.8% decline for the full previous year to a 1.7% growth. Excluding real estate development investment, national fixed-asset investment grew by 4.8% year-on-year, and private investment grew by 1.3%, both turning positive. From the export perspective, "Made in China" continues to improve in quality, efficiency, and services. Exports maintained double-digit growth in the first quarter, further consolidating market diversification.
Third, macroeconomic policies have become more proactive and effective, with policy efficacy continuously being released. Special actions to boost consumption have been implemented, policies for replacing old consumer goods have been enhanced, supporting the positive trend in the consumer market. In the inaugural year of the "15th Five-Year Plan," a series of major strategic tasks, reform initiatives, and engineering projects have been launched. The lists for the first batch and advance batch of "dual major" construction projects and central budget investment plans are being gradually issued. The utilization of ultra-long-term special treasury bonds and local government special bond funds has been intensified and made more effective, providing strong support for stabilizing investment. More proactive fiscal policies and appropriately accommodative monetary policies will continue to exert their effects in the future.
Current economic development still faces risks and challenges. Internationally, the impact of changes in the external environment is deepening, global economic growth momentum is weak, geopolitical risks are rising, supply shocks and imported inflation pressures are emerging, the economic performance of major economies is diverging, and adjustments in monetary policies by central banks worldwide carry uncertainty. Domestically, longstanding issues and new challenges in economic development and transformation are interwoven, the task of transitioning between old and new growth drivers remains arduous, and the contradiction of strong supply versus weak demand persists.
However, it must be recognized that the fundamental supporting conditions and long-term positive trend of the Chinese economy remain unchanged. The advantages of the system and being a major country are continuously demonstrated. Confidence must be strengthened, advantages fully utilized, and various risks and challenges calmly addressed. Efforts should focus on enhancing economic resilience, consolidating the development foundation, continuously reinforcing and expanding the steady and positive economic momentum to ensure a good start and solid first steps for the "15th Five-Year Plan."
Major price indicators continue to show a moderate recovery trend. In the first quarter, the Consumer Price Index (CPI) rose by 0.9% year-on-year, 0.9 and 1.0 percentage points higher than the end of the previous year and the same period last year, respectively, reaching the highest level since May 2023. The core CPI, excluding food and energy, rose by 1.2% year-on-year, with the cumulative increase exceeding 1% for two consecutive months. The Producer Price Index (PPI) in the first quarter fell by 0.6% year-on-year, narrowing the decline by 1.5 percentage points compared to the fourth quarter of the previous year. In March, it rose by 0.5% year-on-year, marking the first increase after 41 consecutive months of decline, and increased by 1.0% month-on-month, rising for the sixth consecutive month.
Since the beginning of this year, macroeconomic policies have been more proactive and synergistic, the economic operation started well, effective demand has gradually recovered, the supply-demand relationship in the real economy has continuously improved, and market competition order has been optimized, providing strong support for a reasonable price recovery. Recent geopolitical events in the Middle East have caused international crude oil and some commodity prices to rise, contributing to the current recovery in China's price indicators. Nevertheless, the impact of externally imported inflation on the domestic economic operation warrants close attention.
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