MERICS China Economic Indicators

• Two-year high: The MERICS China Confidence Index rose from 98.0 to 98.6 in Q1 2026, reaching its highest level since Q3 2023, suggesting that sentiment is continuing to improve.
• Clouds on the horizon: The MCCI was lifted by turnover value at the Shanghai Stock Exchange as well as new orders in manufacturing, but most other indicators declined in Q1. For example, new business in the service sector, consumption expenditure per capita and international air travel all deteriorated, casting doubt on how sustainable the MCCI’s recovery will be.

The MERICS China Confidence Index (MCCI): The MCCI – first developed in 2017 – includes the following indicators: stock market turnover, future income confidence, international air travel, new manufacturing orders, new business in the service sector, urban households’ house purchase plans, venture capital investments, private fixed asset investments and disposable income as a share of household consumption. All components have been tested for trends and seasonality. The index is weighted between household and business indicators.

Last updated: April 24, 2026

• Growth makes a strong start: China recorded 5.0 percent GDP growth in Q1, up from 4.5 percent in the previous quarter. China’s top leaders set a growth target of 4.5-5.0 percent for 2026 at the National People’s Congress in March. The strong start to the year will permit policymakers some flexibility in responding to the economic impacts of the US-Israeli war with Iran, as they unfold over the coming months. The government has yet to announce any meaningful increase in fiscal support and appears content to await developments.
• Investment rebounds: Gross capital formation accounted for 1.9 percentage points of growth in Q1, the highest level since Q3 2024. State-led investments in infrastructure and manufacturing generated a rebound in fixed-asset investment, which had contracted by 3.8 percent in 2025. 
• Exports’ share drops: Meanwhile the contribution made by net exports to GDP growth fell to just 0.8 percentage points – the lowest level since Q3 2024 – as China’s trade surplus declined by 16.0 percent compared to the previous quarter.

Last updated: April 24, 2026

• Production recovers: Value-added industrial output in Q1 rebounded from a dip in late 2025; it rose 5.7 percent in March year-on-year, up from 4.8 percent growth in November 2025. The manufacturing production managers’ index (PMI) shot up to 50.4 in March from 49.0 in February, showing a sharp increase in factory activity. 
• High-tech output a highlight: High-tech goods production saw a noticeable uptick from its recent trendline. Strong contributors to Q1 growth included 3D printing devices (up 54.0 percent), lithium-ion batteries (up 40.8 percent) and industrial robots (up 33.2 percent).
• Profits rise: Manufacturing operating profits grew by 20.1 percent across January and February, the strongest start to a year since 2022. In March, the producer price index (PPI) rose by 0.5 percent, the first gain since September 2022. At least to begin the year, domestic and external demand are provided robust conditions for industrial firms in China.

Last updated: April 24, 2026

• Data seesaws: After Chinese exports powered upwards by 39.6 percent in February, export growth slackened to 2.5 percent in March. However, the significant variation was largely due to base effects, as there does not seem to have been any impact from US-Israeli war with Iran in March.
• Exports shine: Exports continue to lift China’s economy. They grew by 14.7 percent year-on-year in Q1, including by 21.0 percent to EU markets and by 20.2 percent to ASEAN countries. 
• Digital and green growth: Exports of high-value goods such as integrated circuits and automobiles underpinned strong export growth. According to the China Association of Automobile Manufacturers, exports of electric and hybrid vehicles more than doubled in Q1 in unit terms. Robust global demand for such green technologies is likely to persist this year and aid Chinese exporters as oil prices are projected to remain high.

Last updated: April 24, 2026

• Imports surge: China’s imports grew by their highest level in four years, up by 22.7 percent in Q1, thanks to strong demand for raw materials and advanced electronics. As a result, imports from Australia rose 50.7 percent, those from Brazil rose 36.7 percent and those from South Korea were up 44.3 percent. Imports from ASEAN grew 15.0 percent and the EU was up 10.5 percent.
• Consumer goods miss out: Despite the strong uptick in imports overall, imports of consumer products did not get a boost. Q1 car imports (including chassis fitted with engine) fell 10.2 percent by value, while imports of household appliances dropped by 21.5 percent across January and February yoy.
• Ship traffic: Oil tanker arrivals in 20 major Chinese ports were up 20.4 percent year-on-year in Q1 and 20.3 percent in March (based on the number of ships). Disruptions in the Strait of Hormuz are only beginning show up in Chinese port data in mid-April.

Last updated: April 24, 2026.

• FAI grows again: Reversing its extraordinary decline in 2025, overall fixed-asset investment (FAI) turned positive again, increasing 1.7 percent in the January-March period year-on-year. Infrastructure spending, manufacturing investment, and construction all helped lift FAI. Real estate continued to contract, down 10.6 percent in Q1.
• FAI fueled by state push: Additional funds released by the government towards the end of last year were put to use by state-owned enterprises, delivering the hefty growth in infrastructure investment in Q1. State Grid announced it would invest CNY 4 trillion (about EUR 500 billion) between 2026 and 2030 to upgrade the national power grid, lifting its spending 40 percent on the previous Five-year Plan period. Such activity could help put a floor under investment.
• Challenges remain: Yet FAI will continue to face obstacles. These include local government’s financial problems and the central government’s policies to curb China's spiraling surplus in manufacturing capacity (its anti-involution push). Beijing will likely aim to keep FAI positive, while avoiding a spending spree on the scale of 2009.

Last update: April 24, 2026.

• PPI positive again: After 41 months of decline, higher prices for oil and raw materials nudged the producer price index (PPI) into expansion territory again, up 0.5 percent. The price received by producers of non-ferrous metals, which covers aluminum and copper, climbed even higher on supply constraints and ongoing strong demand, due to global investments in digital and green technologies.
• CPI is also rising: The consumer price index (CPI) continued the upward trajectory which began in Q4, rising by 1.3 percent year-on-year in February (the largest increase since January 2023) and 1.0 percent in March. Higher global oil prices delivered a 10.0 percent month-on-month jump in transport fuel prices in March. Inflation is likely to rise further, due to higher fuel costs. However, the government will have room to adopt more measures to provide support for households and businesses as long as inflation continues at moderate levels. 

Last updated: April 24, 2026.

• Strong minimum wage increases: The provinces of Jiangsu, Zhejiang, and Shaanxi have announced minimum 2026 wage increases of 6.8 percent, 6.8 percent, and 10 percent, respectively, compared to 2025. With China’s GDP growth target lowered to 4.5 to 5 percent this year, these minimum wage increases are unexpectedly strong and signal growing support from policymakers. 
• Labor market faces headwinds: The surveyed urban unemployment rate rose to 5.4 percent in March, its highest level since February 2025. Youth unemployment also saw an increase to 16.9 percent, higher than the 16.5 percent reached in March last year.
• Tackling unemployment: The government is rolling out measures to increase employment, in further signs of policy support. The measures include social insurance subsidies and tax and fee reductions to encourage enterprises to hire fresh college graduates. The State-owned Assets Supervision and Administration Commission has urged SOEs to recruit more graduates.  

Last updated: April 24, 2026.

• Weakness persists: Retail sales growth was lackluster in Q1, rising just 2.4 percent. Relatively strong year-on-year growth of 4.6 percent recorded in Q1 2025 partly explains the meagre increase, but weak consumer sentiment remains the key factor. 
• Online sales lift: Online sales of consumer goods and services grew by 9.2 percent year-on-year across January and February, and by 8.0 percent in Q1 overall. Online merchants benefitted from increased activity over the longer than usual nine-day break for Chinese New Year.
• Subsidy support wanes: Domestic car sales dropped by 9.1 percent during Q1, mainly due to the reduction in subsidies for EVs and less aggressive price-cutting by automakers. Sales of household appliances also recorded zero growth in Q1. This suggests the government’s ongoing consumer-trade in program will not outstrip the spending push it generated in the first half of 2025.

Last update: April 24, 2026.

• National defense is a clear priority. Spending is mostly from the central government and rose by almost half from 2019 to 2025 and is projected to increase by seven percent in 2026. 
• China increasingly relies on borrowing to meet its spending needs. On average, the deficit has risen by 14 percent annually since 2019, outpacing economic growth. Annual national debt interest payments have therefore surged, up by more than half since 2019. Although a moderate five percent of national general public spending went on debt interest payments in 2025, the burden was far higher for the central government budget, at almost one fifth of spending.
• A planned ten percent increase in central government S&T spending during 2026 alone could signal S&T has risen up in the list of policy priorities. Reinforcing that impression, national general spending on S&T rose by eight percent in January and February 2026 year-on-year. This is consistent with technology’s prominent position in China’s recently approved 15th Five-Year Plan (2026-2030).

• National general public spending on resource extraction and industry rose by a whopping 78 percent from 2019 to 2024. Unfortunately, data for 2025 and January and February 2026 is not yet available for this budget category.
• China increasingly relies on borrowing to meet its spending needs. On average, the deficit has risen by 14 percent annually since 2019, outpacing economic growth. Annual national debt interest payments have therefore surged, up by more than half since 2019. While the burden was far higher for the central government budget, things could also worsen for the national general public budget, as its debt interest payments spending surged by 22 percent year-on-year in January and February 2026.
• Social security receives substantial public funds. In the national general public budget, it got a respectable 51 percent spending increase between 2019 and 2025. It is the largest budget category in the national general public budget, with a roughly 15 percent share in 2025. However, most of it is spent on pensions for public officials and the basic pension insurance fund for regular people. Only a trickle is spent on wider social welfare, such as child welfare, elderly welfare, rehabilitation aid and elderly care. Additionally, China’s recent hefty increases in social security spending come from a very low base. Based on spending in the national general budget and social insurance fund budget, China’s social expenditures still only amounted to an estimated 11 percent of GDP in 2025. 
• National defense is a clear priority. Total national general spending rose by 20 percent from 2019 to 2025, with a planned increase of 4.4 percent in 2026.