China's Economy Gets Off to a Strong Start in 2026; Major Projects to Continue Driving Stable Investment

On March 16, the National Bureau of Statistics released economic data for January and February.

Driven by strong export performance, an extended Spring Festival holiday, and the launch of major projects in the 14th Five-Year Plan, key economic indicators for January and February showed significant improvement compared to the fourth quarter of last year. Notably, exports and infrastructure investment both achieved double-digit growth in the first two months, laying a solid foundation for a good start in 2026.

Improvement in demand has led to a rebound in supply-side data. The national service production index increased by 5.2% year-on-year, and the value added of industrial enterprises above designated size grew by 6.3% year-on-year in January and February, both exceeding 5%. Some institutions forecast that China’s economic growth rate in the first quarter could be around 5%, a notable improvement from the 4.5% growth in the fourth quarter of last year.

On March 16, Fu Linghui, spokesperson for the National Bureau of Statistics, chief economist, and director of the Department of Comprehensive Statistics on the National Economy, stated at a State Council Information Office press conference that China’s economy started strongly in January and February and is developing positively. However, he also noted that the external environment remains uncertain, and domestically, there is a contradiction of strong supply and weak demand. Moving forward, more proactive macroeconomic policies will be implemented to continue expanding domestic demand, optimize supply, develop new productive forces according to local conditions, and promote sustained and healthy economic development.

Economic Data Significantly Exceeded Expectations

Demand-side data for January and February continued to improve, with particularly impressive export performance, stabilization and recovery in investment, and a rebound in retail sales of consumer goods.

In January and February, total imports and exports reached 77.321 trillion yuan, up 18.3% year-on-year. Exports totaled 46.178 trillion yuan, up 19.2%; imports totaled 31.143 trillion yuan, up 17.1%. China’s exports in 2025 demonstrated strong resilience, achieving a full-year growth of 6.1% despite external challenges; in the first two months of this year, export growth further accelerated to 19.2%.

Zhang Lin, deputy director of Far East Credit Research Institute, told 21st Century Business Herald that the export data for January and February significantly exceeded expectations for three main reasons. First, the offsetting timing of the Spring Festival and the low base effect. The 2026 Spring Festival holiday falls in mid to late February, expanding the window for production and exports before the holiday; meanwhile, the 2025 Spring Festival was at the end of January and early February, resulting in a lower base for that period. It is estimated that the offsetting effect of the Spring Festival contributed over 10 percentage points to the year-on-year export growth in January and February. Second, the upgrading of industrial structures in ASEAN and Belt and Road countries has driven strong growth in exports of electromechanical products, high-tech products, integrated circuits, automobiles, and automated data processing equipment in recent years, providing strong support for China’s exports of capital and intermediate goods to these regions. Third, the booming AI industry has boosted exports along the semiconductor supply chain.

Investment in January and February stabilized and rebounded, increasing by 1.8% year-on-year, reversing the 3.8% decline for the whole of last year, with a growth margin of 5.6 percentage points. In terms of sectors, infrastructure investment grew by 11.4% year-on-year, manufacturing investment increased by 3.1%, while real estate development investment declined by 11.1%.

Fu Linghui responded to a question from 21st Century Business Herald, stating that this year marks the beginning of the 14th Five-Year Plan, with major infrastructure projects starting construction, driving rapid growth in related investments. Infrastructure investment in January and February increased by 11.4% year-on-year, 10.8 percentage points faster than last year, contributing 3 percentage points to overall investment growth. Driven by industrial upgrading, the demand for transformation in traditional industries and development of emerging industries has expanded, leading to a rebound in manufacturing investment. Manufacturing investment in January and February grew by 3.1% year-on-year, 2.5 percentage points faster than last year.

Retail sales of consumer goods increased by 2.8% year-on-year in January and February, 1.1 percentage points faster than in the fourth quarter of last year. Notably, policies promoting “two new” (new energy vehicles and new infrastructure) contributed significantly, with retail sales of communication devices above designated size rising by 17.8%. However, due to the phased reduction of purchase tax exemptions for new energy vehicles (full exemption last year, halved this year), retail sales of automobiles above designated size declined by 7.3%. Meanwhile, driven by the extended Spring Festival holiday, service retail sales increased by 5.6% year-on-year, 0.1 percentage points faster than last year, with fast growth in transportation, cultural and leisure services, and tourism consulting.

Liao Bo, chief macro analyst at GuoKai Securities, told 21st Century Business Herald that consumer data for January and February steadily rebounded, with transportation and other service demands during the Spring Festival period continuing to release. Car consumption was relatively flat or related to demand pre-empting policies. Considering household leverage, asset-liability repair speed, income, and employment expectations, it is expected that consumption will show a steady recovery this year, though still below potential growth rates. Policies encouraging replacement and renewal will support consumption, but the impact of real estate adjustments on consumption should also be monitored.

First Quarter Economic Growth Expected to Be Around 5%

The strong economic start in January and February has laid a solid foundation for a good first quarter. The government work report explicitly set the growth target at 4.5%–5%, with efforts to achieve better results in practice.

The improvement in demand has driven a rebound in supply-side data. Industrial added value above designated size increased by 6.3% year-on-year in January and February, 1.3 percentage points faster than in the fourth quarter of last year, and 0.4 percentage points higher than the whole of last year. The national service production index rose by 5.2% year-on-year, slightly faster than in the fourth quarter but 0.3 percentage points lower than last year’s annual figure.

Overall, the main economic indicators for January and February showed improvement compared to the fourth quarter of 2025, indicating a trend of stabilization and recovery.

Ruo Zhi Heng, chief economist at Yuekai Securities, told 21st Century Business Herald that the overall performance of economic data in January and February exceeded expectations, with market demand steadily increasing and production and supply accelerating. The extended Spring Festival holiday and replacement policies contributed to a 2.8% year-on-year increase in retail sales of consumer goods, faster than in the fourth quarter; fiscal and credit funds were front-loaded, with infrastructure investment up 11.4% year-on-year, becoming the main driver of fixed asset investment; global AI infrastructure investment accelerated, coupled with diversification of China’s export markets and upgrading of commodity structures, leading to a 21.8% increase in dollar-denominated exports, achieving an unexpectedly strong start; additionally, industrial and service production accelerated, prices modestly rebounded, and the real estate market showed positive signs.

Zhang Lin noted that the macro economy achieved a “structural good start” in the first two months. Industrial added value above designated size increased to 6.3% year-on-year, and exports grew by 19.2%, both significantly better than expected. Meanwhile, under the influence of the Spring Festival holiday, consumption growth remained relatively weak; investment stabilized but real estate still lagged. With a combination of stable industry, strong external demand, weak but recovering consumption, and mild rebound in investment, the probability of GDP growth in the first quarter marginally rising to or near the upper limit of the target is high. Historically, later Spring Festivals tend to lead to stronger export and production data in January and February, with March data often falling back. Overall, GDP growth in the first quarter may approach or reach the upper end of the expected range.

Liao Bo stated that the economy in the first quarter is expected to continue its steady progress, with a “good start” worth looking forward to, and the growth rate possibly exceeding 5%. Looking ahead to 2026, resilient external demand will continue to support China’s GDP growth around 5% in the first year of the 14th Five-Year Plan. Policies are likely to tilt toward technological innovation and service consumption, while moderate price increases will depend more on the strength of countercyclical policies to expand domestic demand.

Fu Linghui concluded that the overall economic data for January and February significantly exceeded market expectations, fully reflecting China’s strong vitality and resilience. Despite ongoing domestic and international challenges and many uncertainties, the fundamental conditions and long-term positive trend of China’s economy remain unchanged. As new productive forces grow and the new development pattern accelerates, macro policies will become more effective, and the national economy is expected to continue its steady and progressive development, continuously improving and upgrading.