China: Inflation and trade data support modest recovery ING-FX

China: Inflation and trade data support modest recovery ING-FX

China’s inflation and trade data for early 2026 suggest a modest economic recovery, according to analysts at ING. The country’s February consumer price index (CPI) is projected to rise to 1.0% year-on-year, driven by the Lunar New Year effect, which typically boosts food demand and prices during holiday periods according to ING analysis. This follows a slower January CPI reading of 0.2% YoY, which was weighed down by base effects from the 2025 Lunar New Year. While energy prices from the Middle East conflict have yet to fully impact inflation, ING economists anticipate their influence to appear in March data.

Trade figures for the first two months of 2026 also point to a recovery, with exports and imports expected to grow by 9.3% and 8.5% YoY, respectively, resulting in a trade surplus of $188.1 billion. This resilience is attributed to sustained external demand, though domestic challenges—such as weak consumer spending and a struggling property sector— remain constraints. ING notes that China’s economic strategy prioritizes “higher quality, lower growth” and lacks large-scale fiscal stimulus to offset global headwinds, such as geopolitical tensions and U.S. tariff pressures according to ING analysis.

The data underscores a cautious outlook: while short-term factors like seasonal demand and export strength support a modest rebound, structural issues and external uncertainties limit the pace of recovery. Policymakers continue to balance growth objectives with efforts to stabilize household incomes and rebalance the economy toward consumption-driven expansion according to AMRO analysis. For now, markets remain focused on how these dynamics interact with global energy prices and trade tensions in shaping China’s trajectory.