China’s GDP beats expectations amid intensifying global headwinds in World Economy News 17/04/2026 China’s GDP started 2026 off strong China’s GDP came in at 5.0% year-on-year in the first quarter, beating the market and our expectations for a more modest start to the year. This 5.0% level was in line with the 2025 full-year growth and the fastest since the second quarter of 2025. The services sector gets the credit for this outperformance. China’s tertiary industry grew 5.2% YoY in 1Q26, outpacing the 4.9% growth in the secondary industry and the 3.8% growth in the primary industry. Households rebalancing spending from goods to services could be a factor in why growth beat expectations despite the slowdown of retail sales. The breakdown of the GDP data will make for interesting reading when more details are available in a few days. We just saw China’s 1Q26 trade surplus fall in YoY terms. There are also growing signs of reflation, which should be weighing on the GDP deflator. March’s data show stronger-than-expected industrial activity but disappointing investment and consumption, suggesting that domestic activity remains sluggish. It’s likely that 1Q26 growth is mostly insulated from the negative impact of the Iran war. China is well-placed to weather short-term disruptions, but could face more pressure if energy prices remain higher for longer. We could see a greater impact of higher prices on import costs and input costs in the months ahead. However, for now, this above-expectation growth at the start of the year is positive news for China’s growth, helping it achieve this year’s growth target of 4.5-5.0%. It gives policymakers some buffer to work with and potentially reducing the urgency to ramp up more aggressive stimulus. Industrial activity remains bright spot in China’s domestic activity data Value added of industry rose 5.7% YoY in March, down from the 6.3% YoY ytd level in the first two months of the year, but still stronger than market consensus and our slightly more optimistic forecast. Through the first quarter of 2026, value added of industry has grown 6.1% YoY ytd, a clear outperformer in China’s domestic activity indicators. Strong external demand continues to support China’s industrial activity. The areas with the fastest-growing exports also saw the strongest industrial production growth, such as rail, ships, and aeroplanes (13.3%), computer, communication, and electronic equipment (12.5%), autos (7.5%), and semiconductors (20.6%). China’s robotics industry continues to see solid growth, with production of industrial robots (24.4%) and service robots (6.7%) both surpassing the headline growth. China’s increasing hi-tech manufacturing (11.7%) competitiveness is likely to be one of the core pillars of growth in the coming years. Retail sales growth sliding as trade-in policy effects offset decent performance elsewhere Retail sales, on the other hand, missed expectations, coming in at just 1.7% YoY in March, after a 2.8% YoY ytd start in the first two months of the year. Through the first quarter of 2026, retail sales have grown just 2.4% YoY ytd. We’ve written many times about the fading impact of China’s trade-in policy and how it was gradually turning from a tailwind to a headwind in the data. We’re seeing this play out very clearly in the data. Looking at the key beneficiary categories of China’s trade-in policy, we saw household appliance sales drop by -5.0% YoY in March, lowering 1Q26 growth to 0.0% YoY, after year