KPMG 2026年第二季度中国经济观察报告 China Economic Monitor 2026 Q2

China

Economic

Monitor

Issue:2026Q2

KPMG.MaketheDifference./cn

June2026

Keytakeaways

•China’seconomymadeastrongstartto2026,supportedbyfront-loadedpolicyeasingandresilientexternaldemand.RealGDPgrew5.0%year-on-year(YoY)inQ1,acceleratingby0.5percentagepointsfromQ42025andreachingtheupperboundoftheofficial‘4.5%–5.0%’growthtargetrangesetattheannual“TwoSessions.”Twostructuraldevelopmentsstoodoutatthestartoftheyear.First,improvingdomesticsupply-demandconditionscontributedtoarecoveryinnominalgrowth.Second,thetransitionfromtraditionaltonewgrowthdriversacceleratedfurther.

•Ontheconsumptionside,retailsalesofconsumergoodsgrew2.4%YoYinQ1,up0.8percentagepointsfromthepreviousquarter.Consumptionrecoveredgradually,supportedbyacombinationofpolicymeasures,includingholidayconsumptionvouchersissuedbylocalgovernments,culturalandtourismpromotioncampaigns,andanewroundoftrade-inprograms.Bothgoodsandservicesconsumptionshowedsignsofimprovement.

•Supportedbyresilientglobalmanufacturingactivity,exportsgrew14.7%YoYinQ1,10.9percentagepointshigherthanthepreviousquarter.

Exportgrowthstrengthenedacrossbothemergingmarketsandtraditionaltradingpartners.StrongglobaldemandrelatedtotheAIsupplychainandtheenergytransitionboostedexportsofrelatedproducts.However,theexternalenvironmentremainschallenging.AfurtherescalationoftensionsintheMiddleEastcouldkeepenergypriceselevated,weighingonglobalgrowthandcreatingheadwindsforChina’sexports.

•Industrialproductionmaintainedsolidmomentum,andgrew6.1%YoYinQ1,slightlyabovethe5.9%growthrecordedinQ42025.Strongexportssupportedproductioninsectorssuchasintegratedcircuits,whilehigh-techmanufacturingoutputrose12.5%amidfasterdevelopmentofnew

growthdrivers.Holiday-relateddemandalsoboostedconsumergoodsproduction,andgeopoliticaltensionsintheMiddleEastcontributedtofasterdomesticoilandgasoutput.

•Investmentactivityshowedsignsofstabilisation.Fixedassetinvestmentgrew1.7%YoYinQ1,recoveringfroma12.8%contractioninQ42025andoutperformingthe3.8%declinerecordedfor2025asawhole.Front-loadedfiscalsupportacceleratedinfrastructureprojectlaunchesand

equipmentinvestment.Infrastructureandmanufacturinginvestmentgrowthroseto8.9%and4.1%,respectively,helpingoverallinvestmentstabiliseandsupportingthebroaderrecovery.Realestateinvestmentremainedweak,declining11.2%YoY,althoughthepaceofcontractionnarrowedsignificantlyfromQ42025.

•Lookingahead,geopoliticalvolatilitywillcontinuetoposeuncertaintiesforChina’sgrowthoutlook.TheAprilPolitburomeetingcalledforstrongerconfidenceandmoresupportivepolicytoaddressexternalshocks.Goingforward,policymakersareexpectedtomakefulluseofexistingpolicymeasures,strengthendomesticdemand,optimisesupplystructures,andbetterbalancedevelopmentandsecurity.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

2

Growthstrengthensasdomesticrebalancingandnewgrowthdriversgaintraction

Growthrateofmajoreconomicindicators,YoY,%

2020-23Average

2024Q4

2025Q1

2025Q2

2025Q3

2025Q4

2026Q1

GDP

4.8%

5.4%

5.4%

5.2%

4.8%

4.5%

5.0%

Industrialproduction

5.1%

5.7%

6.5%

6.4%

6.2%

5.9%

6.1%

Retailsales

3.7%

4.0%

4.6%

5.4%

3.5%

1.6%

2.4%

Fixedassetinvestment

4.0%

2.6%

4.2%

2.1%

-6.2%

-12.8%

1.7%

Exports

7.8%

9.9%

5.7%

6.2%

6.5%

3.8%

14.7%

Imports

5.3%

-1.8%

-7.0%

-0.8%

4.6%

3.1%

22.7%

Incomeper

capita

4.8%

5.3%

5.6%

5.3%

5.1%

5.0%

4.9%

Fiscal

revenue

4.6%

13.1%

-1.1%

0.6%

2.5%

-7.9%

2.4%

Fiscal

expenditures

3.7%

8.0%

4.2%

2.6%

2.4%

-4.2%

2.6%

Source:Wind,KPMGanalysis

Note:GDPgrowth,industrialproduction,andincomepercapitaareinrealterms,otherindicatorsareinnominalterms.

•China’seconomymadeasolidstarttotheyear.TwostructuraltrendsstoodoutinQ12026.First,improvingdomesticsupply-demanddynamics

supportedarecoveryinnominalgrowth.

NominalGDPgrowthacceleratedfrom3.8%inQ42025to4.9%,whiletheGDPdeflator

approachedzerogrowthforthefirsttimein12quarters.Externally,risingglobaloilpricesamidtensionsintheMiddleEastcontributedtoa

moderatepickupindomesticinflation,withPPIturningpositiveinMarchforthefirsttimein41months.

•Second,theshifttowardnewgrowthdrivers

accelerated.High-techindustriesoutperformedthebroadereconomyinbothinvestmentand

productiongrowth,withtheartificialintelligence,aerospace,andbiopharmaceuticalssectors

showingstrongmomentum.

•Overall,Q1growthimprovedinbothpaceandquality,withdomesticrebalancingandthe

expansionofnewgrowthdriverslayingafirmfoundationforhigh-qualitygrowth.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

3

Nominalgrowthimprovesdespitepersistentdownsiderisks

GDPdeflator,YoY,%

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

GDPdeflatorroseby0.6percentagepointsfromQ4.

2020-032021-032022-032023-032024-032025-032026-01

Source:Wind,KPMGanalysis

•Majoreconomicindicatorsoutperformed

expectationsinQ1,whilenominalgrowth

recoveredrapidly.TheGDPdeflatorimprovedto-0.06%inQ12026,up0.6percentagepoints

fromQ42025.

•However,growthstillfacesseveralheadwinds.EscalatingtensionsintheMiddleEastcould

driveenergypriceshigher,weighingonglobalgrowth,slowingexports,andincreasing

importedinflationpressures.Domestically,

elevatedyouthunemployment,weakincomeexpectations,andgeopoliticaluncertaintymaycontinuetoweighonconsumptionand

investmentsentiment.

•Inresponse,theAprilPolitburomeeting

introducedadditionalmeasurestostabiliseinvestmentandsupportconsumption.

Policymakersemphasisedtheneedtounlock

domesticdemandpotentialbyexpandingthe

supplyofhigh-qualitygoodsandservices,andacceleratingupgradesintheservicessector,

whichisexpectedtosupportbothconsumptiongrowthandemploymentstabilisation.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

4

Exportsandhigh-techmanufacturingsupportindustrialgrowthmomentum

Growthratesofindustrialproduction,bysector,cumulativeYoY,%

Mining

Raw

Material

PetroleumandCoal

ChemicalRawMaterials

Non-ferrousMetals

FerrousMetals

Non-MetallicMinerals

ElectronicEquipment

RailwayandShip

EquipmentGeneralEquipment

ManufacturingSpecializedEquipment

ElectricalMachinery

AutomobileManufacturing

FoodManufacturing

PharmaceuticalManufacturing

Alcoholic,Beverages,andTea

Consumer

TextileandApparel

Goods

ManufacturingFurnitureManufacturing

SportsandRecreationalGoods

Utilities

-10-505101520

Q120262025

Source:Wind,KPMGanalysis

•IndustrialproductionremainedresilientinQ1,

rising6.1%YoY,slightlyabovethe5.9%growthinQ42025.Theimprovementwasdrivenbyfourfactors.First,strongexternaldemandsupportedproductionofintegratedcircuits,smartphones,ships,andautomobiles.Second,accelerated

developmentofnewgrowthdriversboosted

high-techmanufacturing,withelectronic

equipment,railwayandship,andpharmaceuticalmanufacturingrising13.6%,13.5%,and7.0%,respectively.Third,holidayeffectssupported

food,beverage,andtextileproduction.Finally,tensionsintheMiddleEastdisruptedglobal

energyandchemicalsupplychains,lifting

domesticoutputofoil,gas,coal,andchemicals.

•Lookingahead,industrialactivityisexpectedtoremainresilient.Exportdemandshouldstay

supportiveamidgeopoliticaluncertaintyand

precautionaryinventorybuilding,whilepolicy

supportwillcontinuetounderpinhigh-tech

manufacturing.Effortstostrengthenenergy

securityanddevelopanewenergysystemmayalsoprovideadditionalgrowthmomentum.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

5

Investmentstabilisesamidfront-loadedpolicysupport

Growthrateoffixedassetinvestmentbysector,quarterlyYoY,%

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%

2017201820192020202120222023202420252026

ManufacturingInfrastructureRealEstate

Source:Wind,KPMGanalysis

•Fixedassetinvestmentrose1.7%YoYinQ1,reboundingfrom-12.8%inQ4and-3.8%for2025asawhole.Threefeaturesstandout:

•First,infrastructureinvestmentimprovedmostmarkedly,risingfrom-6.2%inQ42025to8.9%inQ12026,outperformingmanufacturing(4.1%)andrealestate(-11.2%),andprovidingthemainsupporttooverallinvestment.

•Second,high-techinvestmentremainedstrong,up7.4%,withhigh-techservicesaccelerating

from3.5%in2025to12.3%,drivenbyAI-relatedexpansion.

•Third,privateinvestmentremainedweak,down2.2%,whileinvestmentbystate-owned

enterprisesincreased23.5%.Thisdivergence

reflectsfinancingconstraintsinprivatereal

estateandweakerparticipationbyprivatefirmsinmajorprojectsandemergingindustries,as

alsoindicatedbysoftermanufacturingPMI

readingsforsmallerprivatefirmscomparedwithlargerstate-ownedenterprises.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

6

Manufacturinginvestmentreboundsonequipmentupgradesandemergingindustries

Contributionstomanufacturinginvestmentgrowthbysector,percentagepoints

Non-ferrousmetalmeltingChemicalProducts

BlackmetalsmeltingPetroleumandcokingRubberandPlastic

Non-metallicmineral GeneralmachineryElectronicEquipmentRailwayandship

SpecialmachineryAutomobileManufacturing ElectricalMachinery InstrumentsandMetersTextile

FoodprocessingFurFootwearIndustry

-2.0-1.00.01.02.0Q12026Q42025

TobaccoProductsManufaturingRecreationArticles

Alcoholic,BeveragesandTea FurnituremanufacturingPharmaceuticalManufacturing

Raw

Material

EquipmentManufacturing

ConsumerGoods

Source:Wind,KPMGanalysis

•Manufacturinginvestmentgrew4.1%YoYinQ12026,rebounding11percentagepointsfromQ4lastyear,supportedbyfourfactors.

•First,earlierdisbursementofequipmentrenewalfundsliftedmachineryandequipment

investmentby13.9%,drivingarecoveryin

generalandspecialisedequipmentinvestment.Second,policysupportandaccelerated

developmentofnewgrowthdriversboosted

emerging-sectorinvestment.High-tech

manufacturinginvestmentrose5.2%,with

electricalmachinery,electronicequipment,andrailwayandshipprovidingkeysupport.Third,

holidayeffectsstrengthenedactivityinfood

processingandtextiles.Fourth,improved

profitabilityinupstreamindustries,suchasnon-ferrousmetalandchemicalproducts,supportedarecoveryininvestmentsentiment.

•Lookingahead,continuedpolicysupportforequipmentupgradesandtheexpansionofemergingindustriesshouldhelpsustain

manufacturinginvestmentgrowth.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

7

Infrastructureinvestmentreboundsasmajorprojectsaccelerate

Growthofpublicfiscalrevenueandexpenditure,cumulativeYoY,%

Budgetedrevenuegrowth

Budgetedexpendituregrowth

Publicfiscalrevenue

Publicfiscalexpenditure

8

6

4

2

0

-2

-4

Source:Wind,KPMGanalysis

•Infrastructureinvestmentgrew8.9%YoYinQ1,reboundingsharplyfrom-6.3%inQ42025,asmajorprojectsunderthe15thFive-YearPlan

accelerated.

•Fiscalconditionsalsoimprovednotably.PublicfiscalrevenuereturnedtopositivegrowthinQ1,supportedbystrongereconomicactivity,

improvedtaxcollection,resilientimports,andmoreactivecapitalmarkets.Fiscalexpenditurealsoaccelerated,withspendingfrontloadedatthestartoftheyearandcontinuingtoprioritisesocialwelfareandpublicservices.

•Lookingahead,infrastructureinvestmentislikelytoremainresilient.Asakeyanchorfordomesticdemandandinvestmentexpectations,

infrastructurespendingisexpectedtoreceive

continuedpolicysupportthroughaccelerated

implementationofmajornationalprojects,

expandedlocalgovernmentinvestmentcapacity,andmeasurestoencouragegreaterprivate-

sectorparticipation.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

8

Realestatedestockingprogressesascorehousingmarketsshowsignsofstabilisation

RealEstateDevelopmentInvestmentbyProjectStage,quarterlyYoY,%

NewpropertystartsConstructionareaCompletionarea

40

20

0

-20

-40

-60

•Realestateinvestmentdeclined11.2%YoYinQ1,narrowingsignificantlyfrom-29.5%inQ42025,thoughremainingbelowthe-9.9%

recordedayearearlier.Thismarkedthe16thconsecutivequarterofcontractionsincemid-2022.

•ThenarrowingdeclineinrealestateinvestmentinQ1wasmainlydrivenbyimprovingdemandconditions.Commercialhousingsalesareafell10.4%YoY,improvingfrom-16.9%inQ42025.Supportedbyrecoveringdemand,declinesinhousingstartsandconstructionactivityalso

narrowed,withnewpropertystartsandconstructionareafalling20%and12%,respectively.

•Althoughthepropertymarketremained

subdued,destocking1madefurtherprogress.BytheendofMarch,YoYgrowthinunsoldhousinginventoryhadturnednegative,indicatingthat

newhousingsupplyhadfallenbelowunderlyingdemandandthatdevelopershadentereda

phaseofinventoryreduction.

Source:Wind,KPMGanalysis1Developers’inventoryincludeslandreserves,projectsunderconstruction,and

completedbutunsoldhousingunits.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

9

Existinghomemarketsincorecitiesshowsignsofstabilisation

Existinghousingpricesintier-1cities,MoM,%

1.5

1.0

0.5

0.0

-0.5

-1.0

-1.5

2024-092024-122025-032025-062025-092025-122026-03

BeijingShanhaiShenzhenGuangzhouTotal

Source:Wind,KPMGanalysis

•Sincelatelastyear,majorcitieshavecontinuedtoeasehomepurchaserestrictions,supportingarecoveryinexistinghomemarkets.InQ1,

existinghometransactionvolumesinBeijing,

Shanghai,Guangzhou,andShenzhenimprovedfromQ4levels,whilepricechangesintier-one

citiesturnedpositiveMoMinMarch,withallfourcitiesrecordinggains.Thisalsohelpedstabilisenewhomeprices,withtier-onecitynewhome

pricesrising0.2%MoMinMarch.

•Lookingahead,TheAprilPolitburomeeting

emphasisedcontinuedeffortstostabilisethe

propertymarket.Onthesupplyside,reduced

landsupplyandlocalgovernmenteffortsto

absorbidlelandinventoryarelikelytokeepnewhousingsupplyconstrained,easinginventory

pressures,andliftingdevelopers’investment

sentiment.Recentpolicyguidancesuggeststhesectorisshiftingfromanexpansion-drivenmodeltowardonefocusedoninventoryoptimisation

andurbanservices,acceleratingdevelopers’transitiontowardintegratedurbanservice

providers.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

10

Holidayeffectssupportconsumptionwhileunderlyingrecoveryremainsgradual

Growthrateofgoodssalesbycategory,quarterlyYoY,%

CommunicationequipmentTobaccoandalcoholJewelry

Food ApparelsOfficesupplies BeverageCosmetics

DailynecessitiesCateringservicesMedicine

SportsandrecreationalgoodsFurniture

HouseholdappliancesConstructionmaterials PetroleumproductsAutomotive

-20-15-10-50510152025

Q12026

Q42025

Source:Wind,KPMGanalysis.

Note:Goodssalesdataareforabove-sizeretailenterprises

•Totalretailsalesofconsumergoodsrose2.4%YoY,up0.8percentagepointsfromQ4,largelysupportedbyholiday-relatedspending.Servicesconsumptionexpandedrapidly,withservices

retailsalesup5.5%,reflectingbothstructuralupgradinginconsumptionandtheexpansionoflocalisedservicesupply.

•Goodsconsumptionshowedmixedtrends.Itrose2.2%YoY,supportedbysteadyrecoveryinnon-discretionaryconsumptionandcontinuedupgradingdemand,includinggrowthingreenconsumption.However,theboostfromtrade-inpoliciesisfading,withsalesofautomobiles,

householdappliances,telecomequipment,

officesupplies,andfurnituredown4.4%YoY,draggingretailgoodssalesgrowthdownby1.7percentagepoints.

•LookingaheadtoQ2,thetemporaryboostfromholidaysisexpectedtofade,andconsumptionrecoverywillincreasinglydependon

improvementsinemploymentandincomeexpectations.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

11

Slowingincomegrowthamidlabourmarketpressures

Growthrateofpercapitadisposableincomeandconsumptionexpenditure,4QMA,%

72

71

70

69

68

67

66

65

64

63

62

2023202420252026

Percapitaconsumptionexpenditure

15

10

5

0

-5

2017201820192020

Percapitadisposableincome

2021

2022

Consumptionpropensity(rightaxis)

Source:Wind,KPMGanalysis

Note:Consumptionpropensity=percapitadisposableincome/percapitaconsumptionexpenditure

•InQ1,percapitadisposableincomerose4.0%inrealterms,thelowestlevelinnearlythree

years.Labourmarketpressurespersisted,withtheunemploymentraterisingto5.4%,a13-

monthhigh,andstructuralmismatchesin

employment—particularlyforyoungerworkers—becomingmorepronounced.

•Againstthisbackdrop,theaveragepropensitytoconsumefellto62.2%.Percapitaconsumptionexpenditurerose2.6%inrealterms,the

weakestsince2023.

•Inresponse,theAprilPolitburomeeting

emphasiseddeepeningeffortstounlock

domesticdemandpotentialandprioritisedthe

implementationofinitiativestoupgradeand

expandtheservicessector.Servicessector

expansionisseenasbothakeydriverof

consumptionandaneffectivechanneltoalleviatestructuralemploymentpressures.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

12

Inflationrisesmoderatelyassupplyanddemandconditionsimprove

Chinaconsumerpriceindex(CPI),YoY,%

6

5

4

3

2

1

0

-1

201420152016201720182019202020212022202320242025

CPICoreCPICPITarget

Source:Wind,KPMGanalysis

•InQ12026,CPIrose0.9%YoY.Therecovery

wasdrivenbyseasonalconsumptionduringtheChineseNewYear,domesticsupply-demand

adjustments,andexternalfactorsincluding

fluctuationsinglobalcommodityprices.Core

CPIrose1.2%YoY.InMarch,CPIincreased1.0%YoY,easingslightlyfromFebruary,whilecoreCPIremainedstableat1.1%.Foodinflation

moderated,whileenergypricesroseonhigherinternationaloilprices.

•PPIdeclined0.6%YoYinQ12026,andturned

positiveat0.5%inMarch,endingaprolonged

decline.Thereboundwasdrivenmainlybyhigherglobalpricesforoilandnon-ferrousmetals,as

wellasdemandfromAI-relatedindustriesandgreentransition.However,therecoveryremainslargelycost-driven,withlimitedsupportfrom

domesticdemand.Upstreamprofitability

improved,whiledownstreamsectorsremainedunderpressurefromweakfinaldemandand

incompletepass-throughcosts.Theoutlook

remainssensitivetoexternalgeopolitical

conditionsandthepaceofdomesticrecovery.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

13

Monetary-fiscalcoordinationsupportssteadyfinancialexpansionandrealeconomyfinancing

GrowthrateofAFRE(stock),M1,andM2,YoY,%

-5

20192020202120222023202420252026

AFRE(stock)M1M2

15

10

5

0

Source:Wind,KPMGanalysis

•AggregatefinancingreachedRMB14.8trillion,remainingatahighhistoricallevelandgrew

7.9%YoY,down0.4percentagepointsfromend-2025.InMarch,M2andM1roseYoYby8.5%and5.1%respectively,narrowingtheM1–M2

gapto3.4percentagepoints,indicating

improvedbusinessactivityandhigherfund

turnoverefficiency,withliquidityconditionsintherealeconomycontinuingtoimprove.

•The2026GovernmentWorkReportemphasisedaligningmonetaryaggregateswithgrowthandinflationobjectives,withGDPgrowthtargetedat4.5–5.0%andCPIaround2%.Overall,Q1

growthinsocialfinancingandM2remained

abovetheimpliednominalGDPgrowthrangeof6.5–7.0%,maintainingareasonable1–2

percentagepointpremium.Thissupportsgrowthandpricerecoverywhileavoidingexcessive

liquidityexpansion,reflectingamoderatelyaccommodativemonetarystance.

©2026KPMGHuazhenLLP,aPeople'sRepublicofChinapartnership,KPMGAdvisory(China)Limited,alimitedliabilitycompanyinChineseMainland,KPMG,aMacauSARpartnership,andKPMG,aHongKongSARpartnership,arememberfirmsoftheKPMGglobalorganisationofindependentmemberfirmsaffiliatedwithKPMGInternationalLimited,aprivateEnglishcompanylimitedbyguarantee.Allrightsreserved.

14

Governmentbondssupportsocialfinancinggrowth

Growthoftotalsocialfinancing(TSF)bysector,RMBtrillion

20

15

10

5

0

2024Q12025Q12026Q1

Others

Off-balance

sheetfinancing

Stocks

Corporatebonds

Governmentbonds

Bankloans

Total

Source:Wind,KPMGanalysis

•InQ12026,totalsocialfinancing(TSF)continuedtoreflectfrontloadedfiscalexpansion,with

governmentbondsremainingakeydriverof

growth.Issuanceremainedstrong,alignedwiththeimplementationof“TwoNew”and“Two

Major”initiatives.NetgovernmentbondfinancingreachedRMB3.5trillioninQ1.

•Bankloansincreasedby