Domestic demand signals steady expansion, experts say
By ZHOU LANXU
China’s economic growth accelerated to 5 per cent in the first quarter of 2026 despite mounting external uncertainties, underscoring that the resilience of the world’s second-largest economy is underpinned by its vast domestic market, officials and experts said on April 16.
Domestic demand contributed more than four-fifths of GDP growth, they said, with investment returning to positive growth and inflation picking up — a trend expected to anchor steady economic expansion in the coming months.
China’s GDP came in at 33.42 trillion yuan ($4.9 trillion) in the first quarter, growing 5 per cent year-on-year in real terms and 0.5 percentage point faster than in the fourth quarter of 2025, the National Bureau of Statistics said.
“The Chinese economy got off to a good start, with main macroeconomic indicators improving and new growth drivers expanding rapidly,” said Mao Shengyong, deputy head of the bureau, adding that the economy is well-positioned to maintain steady growth in the coming period.
Beating market expectations, first-quarter growth was supported by improving domestic demand and resilient export growth. Retail sales, a key gauge of consumption, grew 2.4 per cent year-on-year, up 0.7 percentage point from the previous quarter, the bureau said.
Fixed-asset investment rose 1.7 per cent year-on-year during the first quarter, reversing a 3.8 per cent decline in 2025, as infrastructure spending strengthened and manufacturing investment accelerated, while the contraction in property development investment narrowed.
In total, consumption and investment accounted for 84.7 per cent of first-quarter GDP growth, up nearly 30 percentage points year-on-year, the bureau said, pointing to a continued shift towards a growth model driven by domestic demand.
Technological and industrial innovation also provided strong support. High-tech manufacturing contributed 32.6 per cent of overall industrial output growth, which is up 6.1 per cent year-on-year, 1.1 percentage points faster than in the fourth quarter of 2025.
Inflation picked up as demand strengthened. Figures calculated by the Japanese investment bank Nomura show that China’s GDP deflator — a broad measure of price levels — improved from -0.6 per cent in the previous quarter to -0.1 per cent in the first quarter, the highest in three years.
“China’s reflation has transitioned from hope or expectation to reality,” said Xiong Yi, Deutsche Bank’s chief economist for China.
Solid economic performance has provided support for China’s stock market, with the ChiNext Index rising 3.17 per cent to close at 3,626.27 points on April 16, an 11-year high.
Junjie Watkins, equity partner at Pictet Group, a Swiss financial services company, said the Chinese market offers “a degree of certainty in an otherwise uncertain environment”, underpinned by its long-term development planning, improving earnings revisions and attractive valuations.
Improving sentiment is also reflected in foreign direct investment trends. A report by the US consulting firm Kearney said China climbed two places to rank fourth globally in the firm’s 2026 FDI Confidence Index, with China’s leadership in artificial intelligence and its vast domestic market being key sources of appeal.
