DBS Group Research economists highlight that China’s Q1 2026 GDP growth accelerated to 5.0% year-on-year, driven by strong external demand and resilient industrial production, while domestic demand in consumption, investment and credit stayed weak. Improving PPI and CPI readings reduce urgency for aggressive monetary easing, leading DBS to scale back its 2026 1Y LPR cut forecast to 10 basis points.
External resilience, softer domestic momentum
“China’s economic growth accelerated from 4.5%yoy in Q4 2025 to 5.0% in Q1 2026, started of with a solid footing. Industrial activity remained well supported by strong external demand, while domestic momentum stayed uneven, with consumption, investment, and credit growth subdued amid persistent property sector stress and ongoing capacity reduction efforts.”
“External trade momentum remained robust. Exports grew 14.7% yoy in Q1, despite a moderation in March amid Middle East-related disruptions.”
“Industrial activity stayed resilient, supported by strong export momentum. Industrial production grew 6.1% yoy in Q1, despite ongoing “anti-involution” measures aimed at curbing excess capacity.”
“Price dynamics improved further. PPI returned to positive territory at 0.5% yoy in March, after 41 months of contraction, driven by higher raw material prices amid supply disruptions linked to the Strait of Hormuz and ongoing capacity adjustment.”
“Accordingly, we revise our 2026 easing expectations to a 10bp cut in the 1Y LPR, from 20bp previously, reflecting a more measured policy stance.”
