20260417-招银国际-China_Economy_Q1_beat_but_recovery_remained_uneven_8页_908kb

China Economy Summary

Core Content

The document provides an analysis of China's economic performance in Q1 2026 and outlook for 2026, focusing on GDP growth, industrial output, fixed asset investment (FAI), property sector trends, and retail sales.

Key Economic Indicators

GDP Growth

• Q1 2026 GDP growth: 5.0% YoY, exceeding market expectations.
• GDP deflator: Improved to -0.1% in Q1 2026 from -0.6% in Q4 2025, suggesting a potential positive reading in Q2 2026 after 14 quarters of deflation.
• Full-year GDP growth outlook: Expected to slow from 5.0% in 2025 to 4.7% in 2026, with Q2 2026 growth likely at 4.6% due to narrowing trade surplus and weak domestic consumption.

Industrial Output (VAIO)

• Q1 2026 VAIO growth: 6.1% YoY, up from 5.0% in Q4 2025.
• March 2026 VAIO growth: 5.7% YoY, above market expectations at 5.4%.
• Export delivery value: Rose to 8.7% in March 2026 from 6.3% in February, indicating continued support from external demand.
• Sectoral performance:
  • Manufacturing: Strong growth at 6.4% YoY for Q1 2026.
  • Chemicals, transport equipment, and electronics: Relatively strong.
  • Non-metallic mineral products: Weak, suggesting soft domestic construction demand.
  • Service output: Slowed to 5.0% in March from 5.2% in February, indicating moderation in domestic activity.

Fixed Asset Investment (FAI)

• March 2026 FAI growth: -1.4% YoY, down from +1.8% in February.
• Property development investment: -11.3% YoY in March, remaining a key drag.
• Manufacturing investment: Improved to 4.9% in March from 3.1% in February.
• Infrastructure investment: Eased to 7.2% in March from 11.4% in February, but remained solid.
• Full-year FAI growth outlook: Expected to recover from -3.8% in 2025 to +1.1% in 2026, with property, infrastructure, and manufacturing investments rebounding from -17%, -1.5%, and +0.6% in 2025 to -9%, +1.5%, and +4% in 2026.

Property Sector

• GFA sold for commodity buildings (YTD): -10.4% in March 2026, up from -13.5% in February.
• New housing sales in tier-1 cities: Surged by 35.5% in early April, indicating limited recovery.
• Property recovery ratio (vs 2018-2019): Fell to 46% in April from 52% in March.
• New and second-hand housing prices: Moderated, with tier-1 cities rebounding slightly and lower-tier cities declining further.
• Second-hand housing sales (11 cities): Moderately rebounded, with YoY GFA growth rising to 9.63% from -4.2% in March.
• Recovery ratio of second-hand housing: Dropped to 114% from 127%.
• Property investment remains weak, with limited signs of recovery not sufficient to repair developers' cash flow or reverse household confidence drag.

Retail Sales

• March 2026 retail sales growth: 1.7% YoY, below market expectations at 2.5%.
• Big-ticket categories:
  • Home appliances: -5.0% YoY
  • Furniture: -8.7% YoY
  • Building materials: -9.0% YoY
  • Autos: -11.8% YoY
• Consumer goods:
  • Food, beverage, apparel, and jewelry: Relatively strong at 9.5%, 8.2%, 7.0%, and 11.7% YoY, respectively.
  • Catering: Moderated to 2.9% YoY in March from 4.8% in February.
• Retail sales outlook: Expected to slow from 3.7% in 2025 to 3.4% in 2026, with consumption growth remaining muted.

Main Views

• Q1 rebound was driven by external demand, particularly exports, and fiscal expansion, rather than broad-based domestic demand recovery.
• The recovery in GDP deflator is limited and may not be sustainable without stronger domestic demand.
• The property sector shows limited recovery, with new starts and funding sources still weak.
• Retail sales moderation reflects a slowdown in big-ticket spending after the holiday season.
• Industrial output remains resilient, supported by export performance and manufacturing growth, but is expected to slow as exports normalize.

Key Information

• Monetary policy expectations: A 50bp RRR cut and a 10bp LPR cut are expected by the end of Q3 2026.
• Energy and commodity prices: May help narrow deflation through cost pass-through, but this is cost-push and could squeeze downstream margins and household purchasing power.
• Middle East tensions: May prompt policymakers to prioritize security over growth, potentially slowing China's economic rebalancing.
• Consumer confidence and household income: Both weakened, with per capita disposable real income growth at 4% in Q1 2026, the lowest in three years.
• Urban unemployment rate and housing rent: Data suggests ongoing economic pressures, though not directly detailed in the text.

Outlook

• GDP growth: Likely to slow from 5.0% in 2025 to 4.7% in 2026.
• FAI growth: Expected to recover from -3.8% in 2025 to +1.1% in 2026, driven by fiscal support and selected industrial upgrading themes.
• Retail sales: Consumption growth is expected to remain muted in 2026, with services gradually recovering.
• Property investment: Likely to remain weak, with housing support continuing to be a key policy focus.

Figures and Data Sources

• Figures 1 to 26 provide detailed visual data on various economic indicators.
• Data sources: Wind, CMBIGM estimates.

Disclaimer

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• CMBIGM does not provide individually tailored investment advice.
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• There are risks involved in trading securities, and actual outcomes may differ from projections.
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• The research analyst certifies that the views expressed reflect their personal views and that they have no financial interest in the companies covered.

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