China’s economy expanded at 4.2% in the first quarter of 2026, missing the government’s 5% annual target by a margin that surprised markets and renewed concern about structural headwinds in the world’s second-largest economy.
The National Bureau of Statistics attributed the shortfall to continued contraction in residential construction, which fell 8.3% year-on-year, and a 2.1% decline in retail sales in February and March despite a Lunar New Year spending bump.
Beijing’s Response
The People’s Bank of China cut the reserve requirement ratio by 50 basis points within hours of the data release. Analysts expect additional fiscal stimulus worth approximately 1% of GDP to be announced at the National Development and Reform Commission briefing next week.