China's economy opened 2026 with stronger-than-expected industrial output and retail sales - but underlying fragility persists. Industrial output rose 6.3% year-on-year in January-February, the fastest pace since September 2025 and above the 5% forecast. Retail sales jumped 2.8%, led by Lunar New Year tourism spending - up nearly 19% - though per-trip spending dipped 0.2%, signaling household caution.
Passenger vehicle sales collapsed 26% year-on-year - hit by expired tax breaks and scaled-back EV subsidies. Fixed asset investment rose 1.8%, reversing expectations of a 2.1% decline, but still reflects the worst annual property investment slump in three decades. The government set a 2026 growth target of 4.5% to 5%, down from last year’s 'around 5%'. A record $1 trillion trade surplus in 2025 deepened global trade tensions. Middle East conflict pressures energy prices and trade flows. Nomura warns the external-domestic demand divide will widen further this year.