China's Industrial Output and Retail Sales Rebound After 7 Months, Exceeding Market Expectations

"China's Growth Driven by Exports"
State-Led Investment Also Plays a Role
Real Estate and Employment Indicators Still Weak

China's industrial production and retail sales figures at the start of this year both broke a seven-month streak of slowdown and exceeded market expectations. Analysts say that, amid heightened uncertainty due to the war in Iran, the Chinese government can be satisfied with these results.

The National Bureau of Statistics of China announced on March 16 that industrial production for January and February of this year increased by 6.3% compared to the same period last year. This marks an acceleration from the 5.2% rise recorded in December 2025, and it is the fastest increase since September 2025. The result also significantly surpassed the market consensus of 5.0% compiled by major foreign media outlets.

During the same period, retail sales grew by 2.8% year-on-year, outperforming both the 0.9% increase seen in December 2025 and the market forecast of 2.5%. Retail sales reflect domestic demand trends by measuring sales at various types of outlets, such as department stores and convenience stores.

The growth rate of China's retail sales had declined for seven consecutive months since May 2025, dropping into the 0% range by December. After the longest period of slowing consumption growth since the COVID-19 pandemic in 2021, the trend reversed with a rebound at the start of this year.

Hao Zhou, chief economist at Guotai Junan Securities in Hong Kong, commented, "Risks to the outlook have increased due to geopolitical tensions and disruptions in global trade and energy markets, but the latest numbers indicate that China is starting the year on a more solid growth foundation than previously thought. In the short term, this will serve as a buffer to defend the economy against external shocks."

Larry Hu, chief China economist at Macquarie, noted, "This round of growth in China was mainly driven by exports. Given the ongoing war, growth may slow somewhat in the second quarter, but for now, the Chinese government is likely quite satisfied with these results."

However, China's real estate indicators remain weak. Real estate development investment for January and February this year amounted to 961.2 billion yuan (about 208 trillion won), a decrease of 11.1% year-on-year. Construction area by Chinese real estate developers fell by 11.7%, while new starts and completions declined by 23.1% and 27.9%, respectively.

Fixed asset investment—which measures changes in capital investment in factories, roads, power grids, and real estate excluding rural areas—reached 5.2721 trillion yuan, up 1.8% compared to the same period last year. In 2025, annual fixed asset investment decreased by 3.8% compared to 2024, recording a negative figure.

Private investment fell by 2.6%, indicating a strong "state-led" character. By enterprise type, investment by Chinese companies increased by 2.1%, while investment by Hong Kong, Macau, and Taiwan-invested companies and foreign-invested companies dropped by 3.0% and 9.1%, respectively.

Serena Zhou, chief economist at Mizuho Securities, said, "The increase in fixed asset investment is the biggest surprise. Such an upside surprise could delay the timing of an expected rate cut originally anticipated at the end of this month."

China's official unemployment rate in February 2026 was 5.3%, up 0.1 percentage point from January.

The National Bureau of Statistics of China stated in a press release, "Key economic indicators for January and February showed a clear recovery, indicating a solid start for the national economy. However, it is important to note that the impact of external environmental changes is intensifying and geopolitical risks are rising."

This content was produced with the assistance of AI translation services.