Standard Chartered economists Carol Liao, Shuang Ding and Hunter Chan note that China’s Q1 Gross Domestic Product (GDP) grew 5.0% year-on-year, above the 4.8% consensus, supported by strong exports and a rebound in fixed asset investment. They highlight stabilising domestic demand, an end to Producer Price Index (PPI) deflation, and expect no near-term rate cuts as the government maintains its current policy stance.

Q1 strength reduces easing prospects

"China’s Q1 growth surprised to the upside on stabilising domestic demand and strong exports. Exports expanded by 14.7% y/y, underpinned by China’s continued competitiveness, tariff reductions and robust demand for its new‑energy and AI‑related goods."

"Fixed asset investment (FAI) growth turned positive at 1.7% y/y in Q1, a sharp rebound from ‑12.8% in Q4-2025, as infrastructure and manufacturing investment recovered on front‑loaded fiscal spending."

"Retail sales showed signs of stabilising, with growth accelerating on a q/q basis. However, the housing market remained under pressure, with deep contractions seen in investment, construction and sales."

"March data softened slightly, largely reflecting Lunar New Year seasonality, base effects from 2025 and a possible early impact from the Middle East conflict. Retail sales growth slowed after the holidays, while export growth eased after a strong showing in January-February (on front‑loaded shipments ahead of the Lunar New Year)."

"At the Politburo meeting in late April, we expect policy makers to highlight potential risks from a prolonged Middle East conflict and the need to reserve policy space to respond. However, given solid Q1 growth and the flexible growth target this year, the government will likely focus on implementing policies already adopted and refrain from stepping up policy support in the near future."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)