Staff sort parcels on the mail sorting assembly line at the Postal Delivery Logistics Joint Distribution Center in Mengshan County, Wuzhou City, Guangxi Province, China, on January 28, 2026. (Photo by Costfoto/NurPhoto via Getty Images)
Costfoto | Nurphoto | Getty Images
China’s economy launched into 2026 with a surprising surge in consumption and factory output, offering a positive jolt amid long-term structural challenges. Early data from the National Statistics Bureau for January and February revealed retail sales grew 2.8% year-on-year, edging past the 2.5% consensus forecast from economists. However, this figure marks a deceleration from the 4% rise seen in the same period of 2025, highlighting a more cautious consumer base even amidst holiday cheer.
Consumption and Industrial Output Defy Expectations
The early-year consumption momentum received a significant tailwind from the mid-February Lunar New Year holiday. Yuhan Zhang, principal economist at The Conference Board’s China center, noted that seasonal spending on tobacco, alcohol, gold, and jewelry provided a noticeable boost. The extended holiday period also spurred activity in services like hotel bookings and duty-free shopping, painting a picture of pent-up demand that temporarily eased pressure for immediate, large-scale stimulus from policymakers.
Manufacturing and Exports Remain Key Drivers
On the production side, industrial output climbed a robust 6.3%, substantially exceeding the 5% growth anticipated in a Reuters poll. This sector has consistently outperformed, buoyed by resilient foreign demand, particularly from European and Southeast Asian markets. This external strength was further underscored by customs data showing outbound shipments surged nearly 22% in the first two months of the year. This export momentum persists despite growing international scrutiny over China’s manufacturing capacity.
Deepening Property Crisis Continues to Weigh
While consumption and industry showed vitality, the protracted property downturn remains a severe drag on overall investment and sentiment. Fixed-asset investment—encompassing infrastructure, manufacturing, and real estate—rose 1.8% year-on-year, a surprising
