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High-tech and advanced industrial sectors were key drivers of growth, with strong exports contributing to domestic output, while weak domestic demand and sluggish growth in certain traditional sectors weighed on the overall activity.<\/p>\n China has targeted a GDP growth rate of between 4.5 and 5 percent<\/a> for the full year 2026. While the current picture is relatively rosy, consumption and inflation indicators highlight persistent challenges that may be exacerbated by increased input costs as a result of the Iran war, squeezing revenue margins, and placing more pressure on household incomes. These potential headwinds could slow the economy in the rest of the year, unless circumstances change or further stimulus is implemented.<\/p>\n China\u2019s Q1 2026 Economy in Numbers<\/p>\n GDP: 33.42 trillion (US$4.9 trillion); +5% yoy Exports: US$977.5 billion; +14.7% yoy CPI: +0.9%; core CPI: +1.2%<\/p>\n Industrial output maintains upward trend, driven by high-tech and advanced manufacturing<\/p>\n China\u2019s industrial value added grew 6.1 percent year-on-year in the first quarter, accelerating 1.1 percentage points from the last quarter of 2025. Industrial revenue (measured from companies with a main annual business income of over RMB 20 million\/US$2.9 million) surged 15.2 percent year-on-year to RMB 1.02 trillion (US$149.5 billion).<\/p>\n In March, industrial value added grew 5.7 percent from 2025, accelerating 0.28 percent from February.<\/p>\n The strong momentum was driven by a 6.4 percent year-on-year increase in manufacturing output, with equipment and high-tech manufacturing growing 8.9 percent and 12.5 percent year-on-year, respectively.<\/p>\n Auto manufacturing output<\/a>, which had slowed in the first two months of the year, recovered momentum with a 7.5 percent uptick in March. Other traditional sectors, such as electronics, pharmaceuticals, and transport equipment manufacturing, cooled slightly in March but continued to post robust output figures.<\/p>\n Some green and heavy industrial sectors saw declines in output in the first quarter. The volume of crude steel fell 4.6 percent year-on-year in the first quarter, while steel products output fell 1.7 percent. Some green manufacturing sectors, which have also been plagued by overcapacity, saw similar trajectories, with photovoltaic cell production falling 12.4 percent year-on-year in power capacity terms.<\/p>\n Private company output for the first quarter continued to outpace that of public companies, with value added reaching 6.1 percent year-on-year growth, 2.2 percentage points faster than state-owned companies. Foreign company value added grew 3.9 percent from the same period in 2025.<\/p>\n How to Read the Data<\/p>\n The Q1 data suggest industrial output is increasingly sustained by high-tech and advanced manufacturing sectors. Meanwhile, certain heavy and green industrial sectors experienced drops that could be signs of corrections to overcapacity issues.<\/p>\n The growth in auto manufacturing output has been fueled by a huge surge in exports \u2013 up 58.5 percent in the first quarter \u2013\u00a0 which offset a sustained drop in domestic sales.\u00a0<\/p>\n The slight slowdown in industrial output recorded in March compared to the January to February period could be the first inklings of the impact of the Iran war, which began at the end of February, as rising costs of fuel and other critical goods begin to make their mark on domestic capacity. However, this could also be the result of seasonal factors, such as the prolonged effects of the Chinese New Year holiday.<\/p>\n<\/p>\n Explore vital economic, geographic, and regulatory insights for business investors, managers, or expats to navigate China\u2019s business landscape. Our Online Business Guides offer explainer articles, news, useful tools, and videos from on-the-ground advisors who contribute to the Doing Business in China knowledge. March factory gate inflation reverses 41-month decline<\/p>\n China\u2019s March factory gate inflation grew 0.5 percent year-on-year, up from a 0.9 percent fall in February and overturning a sustained decline dating back to September 2022. The national industrial producer purchase price index (PPI) also went positive in March, increasing 0.8 percent year-on-year and 1.2 percent from February.<\/p>\n For the full first quarter of 2026, factory gate inflation fell 0.6 percent from the same period in 2025, while PPI fell 0.5 percent.<\/p>\n How to Read the Data<\/p>\n Some analysts<\/a> attribute the positive turn in factory gate inflation to the jump in the price of oil, warning that rather than an organic increase stemming from increased domestic demand, we may be seeing cost-push inflation that will put pressure on businesses and households.<\/p>\n However, in a press briefing<\/a> held for the release of the Q1 indicators, the Deputy Director of the National Bureau of Statistics, Mao Shengyong, stated that the uptick was primarily due to \u201cfurther improvements to the domestic supply-demand relationship\u201d, with increased automation and green industrial upgrades leading to an expansion in demand, in turn driving up prices. He cited sharp price increases in various manufacturing industries in March, including manufacturing of optical fiber, external storage devices and components, and electronic special materials.\u00a0<\/p>\n He added that efforts to control \u201cinvolution\u201d and maintain orderly market competition had achieved positive results in certain industries, contributing to the recovery of prices in industries that suffered from excess capacity and price cutting. For instance, in March, the prices of solar equipment components manufacturing and Li-ion battery manufacturing increased by 5.2 percent and 2.5 percent year-on-year, respectively.<\/p>\n Mao did acknowledge that global prices also had some impact: in March, oil and gas mining industry prices grew 5.2 percent year-on-year, while non-ferrous metal mining industry prices rose 36.4 percent.<\/p>\n It may be too early to assess the underlying cause of the reversal and whether this will be a sustained trend or a temporary rise.<\/p>\n<\/p>\n Consumer prices see moderate uptick amidst sluggish consumption\u00a0<\/p>\n In the first quarter, total retail sales of consumer goods reached RMB 12.77 trillion (US$xxx), up 2.4 percent from the same period in 2025. In March, total retail sales grew 1.7 percent<\/a> from March 2025.<\/p>\n A sharp drop in sales of big-ticket items dragged on overall consumption. March retail sales excluding the sales of vehicles grew 3.2 percent year-on-year and 3.6 percent in the first quarter. Vehicle sales fell by 11.8 percent in March and 9.1 percent in the first quarter, while sales of home appliances remained flat in March and fell by 5 percent in the first quarter.<\/p>\n Lower-value goods saw higher consumption in the first quarter, an effect of the Chinese New Year holiday period that ran from mid-to-late February. Food and beverage sales increased 4.2 percent year-on-year, outpacing merchandise sales. The consumption of basic commodities also grew much faster, with sharp increases in sales of goods such as staple foods (up 10 percent year-on-year) and clothing and apparel (up 9.3 percent).<\/p>\n Services consumption was also more positive, increasing 5.5 percent in the first quarter, maintaining the same rate as in full-year 2025.\u00a0<\/p>\n Consumer prices saw a moderate increase, with the consumer price index (CPI) inching up 0.9 percent in the first quarter, expanding 0.4 percentage points from the fourth quarter of 2025.<\/p>\n How to Read the Data<\/p>\n China\u2019s consumption has remained a thorn in the side of China\u2019s policymakers since the COVID-19 pandemic, as a downturn in the property market prevented the kind of post-pandemic revival seen in other countries. Efforts to boost consumption \u2013 such as issuing consumption vouchers and other purchase subsidy schemes \u2013 have only had temporary effects.<\/p>\n The decline in sales of big-ticket items points to the decline in the efficacy of these tools. The extension of the tax exemption policy for EVs until the end of 2027<\/a> and further subsidy schemes have not translated to sales of EVs, which fell 23.8 percent year-on-year<\/a> in the first quarter.<\/p>\n As with other areas of the economy, it is too early to assess what the impact of rising energy prices could be on household consumption. If China is unable to sustain the shock long-term as it has in the immediate aftermath of the crisis, sustained supply chain disruptions could increase the cost of key consumer goods, further driving down consumption.<\/p>\n<\/p>\n Foreign trade soars in first two months but sees sharp slowdown in March<\/p>\n China\u2019s foreign trade saw a bounce in the first quarter, with total two-way trade accelerating 18 percent to US$1.69 trillion. Of this, exports grew 14.7 percent and imports, which rarely outpace exports, surged 22.7 percent from the same period in 2025.<\/p>\n This momentum slowed sharply in March, with exports growing just 2.5 percent year-on-year. This was offset by a 27.8 percent spike in imports.<\/p>\n China\u2019s top exports in the first quarter were electromechanical products and high-tech products, the latter of which include semiconductors, computers, and vehicles.<\/p>\n Top exports Commodity Electromechanical products*; of which: Semiconductors Computers and components Vehicles, including chassis High-tech products* Textile yarns, fabrics, and their products *May overlap with other data in the table. The export of semiconductors, vehicles, and ships saw particularly rapid growth, increasing 77.5 percent, 58.5 percent, and 48.7 percent, respectively, from the first quarter of 2025 in value terms.<\/p>\n China\u2019s top imports were also electromechanical equipment and high-tech products, with the fastest-growing import product categories including rare earths (up 167.5 percent year-on-year), fertilizer (up 59.6 percent), and computers and computer components (up 49.5 percent).<\/p>\n How to Read the Data<\/p>\n The rapid uptick in foreign trade in the first two months of the year was largely driven by high volumes of trade in electromechanical equipment and electronics, with rising exports to Southeast Asia and developing nations offsetting the continued decline in shipments to the US.<\/p>\n Meanwhile, the substantial rise in imports in the first quarter may indicate that increasing industrial activity is driving domestic demand for input raw materials. However, the sharp uptick recorded in March in particular is likely a factor of the crisis in the Middle East, as China seeks to stockpile critical raw materials for national security reasons, which is skewing the data.<\/p>\n The sudden slowdown in exports in March is likely also attributable to the crisis, as rising prices decrease demand for Chinese exports. If this trend continues, it could have a significant impact on the overall economy due to China\u2019s reliance on export-driven growth.<\/p>\n However, the energy crisis has also highlighted the urgent need to reduce reliance on fuel imports in China\u2019s key export markets, such as the EU, which could lead to an increase in demand for green technology imports from China, especially EVs<\/a> and solar and wind power equipment. Whether this potential demand uplift materializes in time to offset the near-term trade disruption remains to be seen, and will depend heavily on how quickly affected economies accelerate their energy transitions.<\/p>\n<\/p>\n Impact of global supply chain disruptions on China\u2019s economy in 2026<\/p>\n Analysts broadly agree<\/a> that the impact of the Iran war and supply chain disruptions is not yet visible in China\u2019s economic indicators. Thus far, China has been able to absorb the shock of the crisis thanks to its large stockpiles of critical resources that have been released to stabilize local markets.<\/p>\n Find Business Support<\/p>\n However, it is unclear how long this can be sustained, and China\u2019s foreign trade and domestic production and consumption remain exposed to global price volatility.<\/p>\n Rising costs of fuel and other key commodities may have an inflationary effect in key export markets, which could drive down demand for Chinese products. This same phenomenon may also harm domestic production and consumption, as rising costs of inputs drive up costs for Chinese companies and households, damaging business and consumer sentiment.<\/p>\n In the press briefing, Mao pointed out that the relatively moderate growth in consumer prices indicates that the cost of oil and gas has not had a significant impact on the price of goods in China. While he acknowledged that the crisis could impact China\u2019s exports in the coming months, he stressed that the country still has significant advantages that bolster its resilience, including its mature industrial chains and optimized energy structure.<\/p>\n \u201cFrom an international perspective, China has a sound industrial system, strong supply capacity, robust economic resilience, and a relatively stable energy supply. Price increases in related domestic industries are significantly lower than in the international market.\u201d \u2013 Mao Shengyong, Deputy Director of the National Bureau of Statistics<\/p>\n The coming months will be a critical test of the resilience Mao described. If the crisis is short-lived, China\u2019s structural advantages and accumulated reserves may prove to be sufficient to weather the crisis. A more protracted conflict, however, could erode those buffers and expose the country\u2019s underlying vulnerabilities.<\/p>\n For businesses, the stable Q1 data is a reason for optimism, but steps must be taken to ensure preparedness in the case of continued disruption to global supply chains. This involves monitoring for potential shocks and assessing current supply chain risks, diversifying sources for key input materials where possible, and developing contingency plans for shipping and production.<\/p>\n With the region\u2019s rapid economic growth and diverse regulatory environments, businesses must navigate shifting costs, complex compliance frameworks, and conflicting information. Our professionals support investors with actionable data on Asia\u2019s industrial landscape, location analysis, supply chain diversification, and market entry strategy. We also offer business partner matching services and assist in identifying optimal investment destinations through cross-country competitiveness benchmarking.<\/p>\n Co-Head of Business Intelligence<\/p>\n About Us<\/p>\n China Briefing is one of five regional Asia Briefing<\/a> publications. It is supported by Dezan Shira & Associates<\/a>, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Beijing<\/a>, Tianjin<\/a>, Dalian<\/a>, Qingdao<\/a>, Shanghai<\/a>, Hangzhou<\/a>, Ningbo<\/a>, Suzhou<\/a>, Guangzhou<\/a>, Haikou<\/a>, Zhongshan<\/a>, Shenzhen<\/a>, and Hong Kong<\/a> in China. Dezan Shira & Associates also maintains offices or has alliance partners assisting foreign investors in Vietnam<\/a>, Indonesia<\/a>, Singapore<\/a>, India<\/a>, Malaysia<\/a>, Mongolia<\/a>, Dubai (UAE)<\/a>, Japan<\/a>, South Korea<\/a>, Nepal<\/a>, The Philippines<\/a>, Sri Lanka<\/a>, Thailand<\/a>, Italy<\/a>, Germany<\/a>, Bangladesh<\/a>, Australia<\/a>, United States<\/a>, and United Kingdom and Ireland<\/a>.<\/p>\n For a complimentary subscription to China Briefing\u2019s content products, please click here<\/a>. For support with establishing a business in China or for assistance in analyzing and entering markets, please contact the firm at china@dezshira.com<\/a> or visit our website at www.dezshira.com<\/a>.<\/p>\n \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"China\u2019s Q1 2026 GDP growth exceeded forecasts despite rising energy prices and supply chain disruptions stemming from the…\n","protected":false},"author":2,"featured_media":397097,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[114,85,46],"class_list":{"0":"post-397096","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-il","10":"tag-israel"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/397096","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=397096"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/397096\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/397097"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=397096"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=397096"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=397096"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/d2h56l9e5xqoi4.cloudfront.net\/dsa_website_assets\/2025\/img\/dsa-logo-2nd.svg\"){kind=logo}
<\/a><\/p>\n
\nIndustrial output: +6.1% yoy
\nServices output: +5.2% yoy
\nRetail sales: RMB 12.77 trillion (US$1.87 trillion); + 2.4% yoy
\nForeign trade: US$1.69 trillion; +18% yoy; of which:<\/p>\n
\nImports: US$713.2 billion; +27.8% yoy<\/p>\n
\n Start exploring<\/a><\/p>\n
\nTop imports<\/p>\n
\nQ1 value (USD billion)
\nQ1 growth (%)
\nCommodity
\nQ1 value (USD billion)
\nQ1 growth (%)<\/p>\n
\n620\u00a0
\n21.40
\nElectromechanical products*; of which:
\n281.02
\n24.9<\/p>\n
\n29.15
\n77.50
\nSemiconductors
\n128
\n45.0<\/p>\n
\n23.93
\n26.70
\nComputers and components
\n35.74
\n49.5<\/p>\n
\n40.77
\n58.5
\nHigh-tech products*
\n231.53
\n29.2<\/p>\n
\n269.37
\n28.60
\nCrude oil
\n71.55
\n-4.7<\/p>\n
\n34.19
\n2.8
\nAgricultural products
\n49.29
\n11.0<\/p>\n
Source: General Administration of Customs<\/p>\n<\/a><\/p>\n![\"Pritesh](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2026\/04\/pritesh-samuel.webp.webp\")
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