Resilience fuels confidence in China's economy

The electronics manufacturing sector remained a major growth engine, with profits surging 103.9 percent year-on-year in the first five months and contributing 43.1 percent to the overall profit growth of major industrial firms, according to the NBS.

"The rapid advance of artificial intelligence worldwide has spurred a surge in demand for advanced computing and memory chips, providing a strong boost to profit growth in the electronics sector," said Yu Weining, a statistician at the bureau.

High-tech manufacturing also maintained solid growth, with profits rising 44.7 percent year-on-year in the first five months, NBS data showed.

Wang Guanhua, a spokeswoman for the NBS, said at a news conference on May 18 that one of the most notable features of China's current economic performance is the faster transition from traditional growth drivers to new ones.

"China has made fresh progress this year in upgrading industries, empowering development through digital technologies and advancing green transformation," Wang said. "The continued growth of new quality productive forces has provided important support for economic expansion."

The strong momentum in advanced manufacturing and AI-related sectors has further bolstered optimism among global financial institutions about China's growth prospects.

Deutsche Bank has upgraded its forecast for China's 2026 real GDP growth to 4.9 percent, after the country's first-quarter growth came in stronger than expected.

NBS data showed China's GDP reached 33.42 trillion yuan in the first quarter of 2026, expanding 5 percent year-on-year in real terms and hitting the upper end of the country's annual growth target range.

Alexander von zur Muehlen, CEO of Deutsche Bank for Asia-Pacific, Europe, Middle East & Africa, and Germany, said the bank's confidence in the Chinese market is rooted in the country's continued shift toward high-quality development and the further opening-up of its financial markets.

Deutsche Bank is not alone in taking a more positive view. Morgan Stanley in May lifted its forecast for China's GDP growth this year to 4.8 percent from 4.7 percent.

Robin Xing, chief China economist at Morgan Stanley, said the revision was supported by resilient exports and robust AI — and green-related investment, which are expected to generate positive spillovers for industrial upgrading and capacity modernization.

Although China's monthly macroeconomic indicators for April and May showed some moderation in consumption and investment, analysts said the broader recovery remains on solid footing, supported by resilient exports, strong manufacturing capabilities and the continued expansion of new growth drivers.

Looking ahead, China is scheduled to release its second-quarter economic growth data on July 15. Wen Bin, chief economist at China Minsheng Bank, said GDP growth may ease to around 4.5 percent in the second quarter, but would still remain broadly in line with the country's annual growth target range, underscoring the economy's underlying resilience.

In particular, Wen said the moderation in real GDP growth should be viewed alongside improving price conditions, which could point to a broader recovery in nominal activity.

With PPI growth continuing to pick up in April and May and CPI staying above 1 percent year-on-year in both months, the GDP deflator is likely to return to positive territory after 12 consecutive quarters of contraction, he said.

"That would help improve nominal GDP growth," Wen added.

A recent report by the China Macroeconomy Forum also struck an optimistic tone, saying China's economy is likely to follow a U-shaped trajectory this year as pro-growth policies and major projects are gradually rolled out and their effects become more visible.

With policy support continuing to take effect, the report said, China has a solid foundation to achieve its annual growth target of 4.5 to 5 percent in 2026.

Still, economists said the structural divergence in the economy deserves close attention.