The first quarter of 2026 saw China's economy achieve a positive start, characterized by accelerated growth in production supply, continued improvement in market demand, moderate price increases, and high-quality development advancing with new and superior momentum. New growth drivers expanded rapidly, showcasing the economy's strong resilience and vitality. However, the external environment remains complex and volatile, while the domestic imbalance of strong supply versus weak demand persists, requiring further consolidation of the economic recovery foundation. Moving forward, precise and effective implementation of more proactive fiscal policy and appropriately accommodative monetary policy is essential. Strengthening the role of proactive fiscal policy in stabilizing growth and adjusting structure, while comprehensively addressing development challenges, will be key. Activating endogenous economic growth momentum by focusing on boosting consumption will help continuously consolidate and expand the steady, improving economic trend.
The economy operated well at the start of the year, with overall stable growth momentum. First, China's economy achieved a good start in Q1. Preliminary calculations indicate China's GDP reached 33.4 trillion yuan, a year-on-year increase of 5.0% calculated at constant prices, with major indicators exceeding expectations. Specifically, the value-added of the primary industry increased by 3.8% year-on-year, contributing 2.6% to economic growth. The secondary industry's value-added grew by 4.9%, contributing 34.1%. Notably, industrial value-added rose by 6.1%, pulling economic growth up by 1.9 percentage points and accounting for 30.9% of GDP. Within industry, manufacturing value-added increased by 6.3%, higher than other industrial sectors. The tertiary sector's value-added grew by 5.2%, contributing 63.2% to economic growth.
Second, market sales accelerated, with service consumption showing strong growth. In Q1, total retail sales of consumer goods approached 13 trillion yuan, up 2.4% year-on-year. On one hand, essential consumption demonstrated resilience. Retail sales of grain, oil, and food products in units above designated size grew by 10.0%, remaining relatively stable. On the other hand, some discretionary consumption improved significantly. Driven by trade-in policies, retail sales of communication equipment and cultural & office supplies in units above designated size increased by 20.8% and 9.3% respectively, with discretionary consumption also showing a "lifestyle-oriented" characteristic. Furthermore, rural consumption outperformed urban consumption, narrowing the urban-rural gap. Rural consumer goods retail sales grew by 3.1%, while urban sales grew by 2.3%. Service consumption remained strong, and online consumption showed a positive development trend. Service retail sales grew by 5.5% year-on-year in Q1, maintaining the same growth rate as 2025. Online retail sales of goods increased by 7.5%, accounting for 24.8% of total consumer goods retail sales.
Third, manufacturing investment steadily recovered, and industrial production growth accelerated. Manufacturing investment grew by 4.1% year-on-year in Q1, contributing to investment and economic growth. Investment in high-tech manufacturing grew by 5.2%, with investment in computer and office equipment manufacturing surging 28.3%, aircraft, spacecraft, and equipment manufacturing up 19.0%, and electronic and communication equipment manufacturing rising 6.6%. The acceleration in manufacturing investment growth is related to improved corporate investment profitability and a relatively accommodative monetary and financial environment. In terms of industrial value-added, the value-added of industrial enterprises above designated size nationwide increased by 6.1% year-on-year in Q1. Value-added of equipment manufacturing above designated size grew by 8.9%, highlighting its role as an economic stabilizer. Leading indicators show an improvement in manufacturing sentiment. The Manufacturing Purchasing Managers' Index (PMI) was 50.4% in March, up 1.4 percentage points from the previous month, indicating a recovery in manufacturing activity. The new orders index stood at 51.6, showing a marked improvement in market demand. The production index was 51.4 and the purchasing volume index was 50.9, indicating accelerated manufacturing production. The raw material purchase price index was 63.9, while the ex-factory price index rose to 55.4, suggesting significant imported price pressures. By enterprise size, the PMI for large enterprises was 51.6%, indicating strong resilience, while PMIs for medium and small enterprises rose by 1.5 and 4.5 percentage points respectively, showing significant improvement in sentiment.
Fourth, infrastructure investment rebounded noticeably, providing strong support for the economy. Infrastructure investment grew by 8.9% year-on-year in Q1, 7.2 percentage points higher than the growth rate of total investment, contributing 2.7 percentage points to total investment growth. This was mainly due to three factors: concentrated commencement of major projects in the first year of the 15th Five-Year Plan period, with orderly progress on key projects; accelerated issuance and utilization of ultra-long-term special government bonds and local government special bonds, with funds largely directed towards municipal and industrial park infrastructure, transportation infrastructure, and affordable housing projects; and a significant expansion of new policy-based financial instruments, effectively filling capital gaps for major infrastructure projects and leveraging private capital participation.
Fifth, import and export trade grew rapidly, supported by strong manufacturing competitiveness. China's export value reached $977.49 billion in Q1, up 14.7% year-on-year, far exceeding market expectations. Structurally, Guangdong, Jiangsu, Zhejiang, Shanghai, and Shandong contributed over 60% of the import-export growth. Equipment manufacturing products, denominated in RMB, accounted for over 60% of the total export value, with increasing technological innovation attributes. The global competitiveness of mechanical and electrical products and the new energy industry improved. On the import side, the import value was $713.16 billion, up 22.7% year-on-year, driven by domestic demand recovery, leading to more balanced internal and external demand growth. China's export growth reflects a combination of factors including recovering external demand, a complete domestic industrial supporting system, and the release of innovation momentum by enterprises. China's manufacturing sector, with ample capacity, high quality, affordable prices, and strong market adaptability, meets diverse global production and consumption needs. Simultaneously, Chinese enterprises are enhancing their global outreach capabilities, promoting industrial globalization, which also contributes to export improvement.
Sixth, market prices continued to improve. The Consumer Price Index (CPI) rose 0.9% year-on-year in Q1, an increase of 0.4 percentage points from Q4 2025. The core CPI, excluding food and energy, rose 1.2%, indicating reduced deflationary pressure and a further improvement in the situation. The Producer Price Index for Industrial Products (PPI) fell 0.6% year-on-year in Q1, with the decline narrowing. Influenced by rising international commodity prices and improved supply-demand dynamics in some domestic sectors, the PPI increased 1.0% month-on-month and 0.5% year-on-year in March.
Seventh, the structure of aggregate social financing improved. The incremental aggregate social financing reached 14.83 trillion yuan in Q1, remaining at a relatively high level historically. Loan scale maintained reasonable growth with ongoing optimization of credit structure; capital market development progressed, with the proportion of direct financing significantly increasing. By the end of March, the broad money supply (M2) grew 8.5% year-on-year, 1.5 percentage points higher than the same period last year, reflecting the accommodative and supportive stance of monetary policy, creating a favorable monetary and financial environment for the real economy.
Fiscal revenue grew steadily while expenditure was front-loaded in Q1, resulting in a good start for fiscal operations. General public budget revenue saw significant growth, and the pace of general public budget expenditure was the fastest in nearly five years, with the expenditure structure placing greater emphasis on "investing in people."
First, the growth rate of general public budget revenue was higher than the average for the same period over the past three years. National general public budget revenue reached 6,161.3 billion yuan, up 2.4% year-on-year. Central government general public budget revenue was 2,499.1 billion yuan, up 2.7%; local government general public budget revenue was 3,662.2 billion yuan, up 2.1%. Tax revenue reached 4,850.5 billion yuan, up 2.2%, benefiting from growth in industrial and service sectors and the recovery in PPI. The top five taxes were domestic value-added tax, corporate income tax, personal income tax, domestic consumption tax, and value-added tax and consumption tax on imported goods, together accounting for over 90% of tax revenue. VAT grew 4.9%, indicating a positive trend in the national economic cycle, particularly the positive impact of price recovery.
Second, the pace of general public budget expenditure was the fastest in nearly five years, with a structure emphasizing "investing in people." National general public budget expenditure was 7,470.6 billion yuan, up 2.6%. Central government general budget expenditure was 914.9 billion yuan, up 4.9%; local government general public budget expenditure was 6,555.7 billion yuan, up 2.3%. The expanded scale and accelerated pace of fiscal expenditure reflect the front-loaded nature of proactive fiscal policy. In terms of structure, spending on people's livelihoods ("investing in people") grew faster than infrastructure spending. Expenditure on social security and employment increased 9%, and health expenditure rose 12.1%. From an economic perspective, "investing in people" aligns with current Chinese economic characteristics. Research shows that livelihood expenditures, particularly transfer payments to low- and middle-income groups, have a significantly higher effect on stimulating consumption than traditional infrastructure investment. After decades of high-intensity accumulation, the marginal returns on traditional infrastructure investment are diminishing, whereas the consumption multiplier effect of livelihood spending is more pronounced. Therefore, direct increases in disposable income through child-rearing subsidies and pension adjustments for low- and middle-income groups translate into consumption expenditure at a much higher rate than for other groups. The policy effects of "investing in people" in Q1 will gradually manifest in subsequent quarters through boosted consumption.
Utilizing macro policies effectively is crucial to further consolidating the foundation for sustained and stable economic improvement. China's economic recovery is steadily progressing, with momentum for high-quality development accumulating. Facing certain difficulties and challenges, it is essential to utilize macro policies fully, deeply tap domestic demand potential, and further consolidate the basis for sustained economic improvement.
First, boosting consumption is key to promoting China's economic growth. Multi-pronged measures targeting income, expectations, and asset prices are recommended. This includes researching policies for increasing resident income, vigorously developing producer and consumer services, and enhancing the employment absorption elasticity per unit of GDP. Secondly, improving the social welfare mechanisms for social security, healthcare, and pensions, and accelerating the formation of a social safety net will enhance consumer confidence and propensity to consume.
Second, macro policies need to remain proactive to promote steady economic progress. Given the domestic supply-demand imbalance, macro policies should maintain an active stance, avoiding a reduction in intensity or premature policy shift. Fiscal policy should be more proactive, and monetary policy appropriately accommodative, with multiple measures supporting consumption recovery and investment rebound. To address cost transmission from upstream price increases squeezing midstream and downstream profits, consider implementing structural cost-reduction policies to block upstream costs from eroding downstream enterprise profits. Targeted tax and fee reductions for downstream manufacturing, services, and SMEs with weaker bargaining power, along with guiding policy financial institutions to increase support for related industries, are suggested.
Third, implement more proactive fiscal policy precisely and effectively. Proactive fiscal policy helps stimulate economic growth, playing a counter-cyclical role on the demand side and a structural adjustment role on the supply side. On the aggregate level, support building a strong domestic market, closely integrating efforts to benefit people's livelihoods with promoting consumption, and investing in physical capital with investing in human capital, to achieve a virtuous cycle of consumption and investment. Structurally, use fiscal policy to定向支持 develop new quality productive forces, accelerate high-level sci-tech self-reliance, strengthen livelihood safeguards and improvements, advance rural revitalization, promote coordinated regional development, and drive a comprehensive green transformation.
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