DBS Group Research economists highlight that China’s GDP growth accelerated to 5.0% year-on-year in the first quarter of 2026, supported by mighty external demand and buoyant industrial production, while domestic demand for consumption, investment and credit remained delicate. Improving PPI and CPI readings reduce the need for aggressive monetary easing, which prompted DBS to limit the forecast of 1-year LPR cuts for 2026 to 10 basis points.

External resistance, less internal dynamics

“China’s economic growth accelerated from 4.5% y-o-y in Q4 2025 to 5.0% in Q1 2026, starting from a solid foundation. Industrial activity continued to be well supported by strong external demand, while domestic dynamics remained uneven and growth in consumption, investment and credit was subdued amid persistent tensions in the real estate sector and ongoing efforts to reduce production capacity.”

“External trade dynamics remained solid. Exports rose 14.7% year-on-year in the first quarter, despite moderate growth in March amid disruptions in the Middle East.”

“Industrial activity remained stable, supported by strong export growth. Industrial production grew 6.1% year-on-year in the first quarter, despite ongoing ‘anti-revolutionary’ measures to curb overcapacity.”

“Price dynamics improved further. PPI returned to positive 0.5% y/y in March, after 41 months of declines, supported by higher commodity prices due to Strait of Hormuz-related supply disruptions and ongoing capacity adjustments.”

“We are therefore revising our monetary easing expectations for 2026 to a 10 basis point cut in the 1-year policy rate from the previous 20 basis points, reflecting a more measured policy stance.”

(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)