TOKYO - China's National Bureau of Statistics said on April 16 that the country's real gross domestic product grew 5.0 percent from a year earlier in the January-March period, exceeding the previous quarter's growth for the first time in five quarters as domestic demand improved and external demand remained firm despite a slowdown trend in 2025.
The outcome put China on a favorable footing toward achieving the government's full-year 2026 growth target of 4.5 percent to 5.0 percent, set at the annual session of the National People's Congress, the national legislature, in March.
Looking ahead, policy support and external demand are likely to continue underpinning the economy. At the National People's Congress, the government indicated its willingness to carry on economic measures such as subsidies for home appliances and equipment upgrades, as well as infrastructure investment, following similar steps taken in 2025.
Meanwhile, U.S.-China trade frictions that weighed on external demand in 2025 have been in a lull since a bilateral summit in late October. With U.S. President Donald Trump visiting China in May, the likelihood has diminished that exports to the United States will come under renewed pressure.
Based on such assumptions, the economic growth target appears within reach. The domestic and external environment surrounding China's economy, however, remains complex, and risks of renewed instability persist.
On the domestic front, the supply-demand imbalance that has lingered for several years has yet to improve sufficiently. Demand remains weak amid a property slump and local government debt problems, while production momentum remains strong due to excessive corporate competition. The GDP deflator, an index tracking price trends, has been negative for 12 straight quarters since the April-June period in 2023, suggesting deflationary pressure has yet to ease.
Resolving these issues will take time, and the economy is expected to lack the momentum needed for a self-sustaining recovery. If the property market downturn deepens or if the handling of off-the-books "hidden debt" squeezes local government financing more than projected, domestic demand could deteriorate, putting the target at risk.
Abroad, the biggest concern is the heightened tensions in the Middle East since late February following the start of U.S.-Israeli attacks on Iran. While the United States and Iran have reached a tentative cease-fire agreement and talks toward ending the fighting may resume, uncertainty remains high.
If the situation improves quickly, the impact on China's economy may be limited. But if the standoff drags on or conditions worsen, a global economic slowdown and higher energy prices could put downward pressure on the Chinese economy.
In 2026, China is set to launch a new medium-term economic blueprint, the 15th Five-Year Plan, and in 2027 it will hold its twice-a-decade Communist Party congress. How President Xi Jinping's leadership confronts domestic and external risks and ensures economic stability will be closely watched.
(Yusuke Miura, born in 1983 and from Tokyo, graduated from Waseda University. After working in the Asia Research Department and the Human Resources Department at Mizuho Research Institute, currently Mizuho Bank, he became senior economist at the NLI Research Institute in 2023.)
