China's economy, early momentum in 2026 - Rising global risks could curb growth
China's economy started the year on a stronger growth footing. Factory output accelerated, retail sales and investment rebounded in January and February, providing early relief for policymakers. But the US-Israeli war with Iran is bringing new uncertainties to growth.
For this reason, analysts warned of new risks from the perspective of geopolitical tension, especially global tensions in trade and energy markets.
However, in the first two months of the year, China saw a surge in exports driven by increased demand for artificial intelligence-related technology, which also boosted production. Chinese industrial output grew 6.3% year-on-year, data from the National Bureau of Statistics showed.
Retail sales, a gauge of consumption, rose 2.8%, accelerating from a 0.9% pace in December, marking their biggest gain since October last year. The strong growth was partly driven by the country’s longer Lunar New Year holidays in February. The festivities helped boost total tourism spending by almost 19% compared with the same holiday period last year. China combines data releases for January and February to smooth out distortions from the year-end holidays, which can fall in either month.
Monday's data provided another encouraging sign for policymakers, as a surprise pick-up in investment eased some of the challenge of a prolonged slump in the critical property sector. Fixed-asset investment, which includes investment in property and infrastructure, expanded 1.8% in the first two months of this year. Infrastructure investment led the recovery, rising 11.4%, as policy support, including a new bank lending facility to finance key projects, began to take effect. However, the nationwide unemployment rate based on surveys rose to 5.3% in the first two months from 5.1% in December. Analysts say China faces significant challenges as it tries to foster sustainable long-term growth.
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