Resilience fuels confidence in China's economy

While industrial production and exports have continued to show resilience, consumption has shown signs of moderation — a trend that underscores the need for stronger policy support to further unlock domestic demand and consolidate the recovery momentum, economists said.

Luo Zhiheng, chief economist and head of the research institute at Yuekai Securities, said the uneven recovery reflects the broader structural transition underway in China's economy.

New growth drivers such as artificial intelligence and high-end manufacturing are gradually taking the place of older engines such as real estate and infrastructure investment, Luo said.

Taking a broader view, Huang Yiping, dean of Peking University's National School of Development, said that despite the challenges facing the Chinese economy, the country has been steadily advancing economic rebalancing.

"If you look at the trajectory of the Chinese economy over the past 20 years or more, the macroeconomic structure is much better now," Huang said at a forum during the 2026 Summer Davos forum.

However, he also cautioned that the rebalancing process remains far from sufficient, especially as domestic consumption still needs to play a stronger role in supporting growth.

"China needs to boost consumption, and it needs to do so in a more proactive way," Huang said.

Luo said the recovery of domestic demand hinges on whether the economy's key transmission mechanisms can be further smoothed.

For households, stable employment and stronger income growth are essential to improving consumer confidence and willingness to spend, he said.

For businesses, a recovery in demand needs to translate into stronger profits and renewed capital expenditure, Luo said.

In the property sector, stabilizing home prices will be important for restoring sales momentum and reviving investment, he added.

Wen said policy support is expected to be further strengthened around midyear, with fiscal and monetary measures working together to stabilize growth.

On the fiscal front, special-purpose bond issuance is likely to accelerate in the second half of the year, while new policy-based financial instruments are expected to be gradually channeled into concrete projects, helping support major projects and infrastructure investment, according to Wen.

On the monetary front, the policy window for interest rate and reserve requirement ratio cuts may open as PPI growth peaks around midyear, leaving room for more timely policy adjustments, he added.

"More incremental policies are expected to boost consumption, stabilize the property sector and support employment," Wen said. "Together, these measures will help stabilize the economy and strengthen the recovery momentum."

Contact the writers at zhangchenxu@chinadaily.com.cn