<ul>
<li>China’s Jan-Feb economic activity beat expectations</li>
<li>Growth mainly helped by exports and holiday spending</li>
<li>Investment turns to expansion on policy support</li>
<li>Risks remain amid weak household spending, property woes, geopolitical uncertainty</li>
</ul>
BEIJING, March 16 (Reuters) - China’s factory output growth quickened in January-February while retail sales rebounded, in a steady start to the year for an economy confronting multiple challenges including the fallout from the U.S.-Israeli war against Iran.
Industrial output rose 6.3% from the same period in the previous year, National Bureau of Statistics data showed on Monday, up from the 5.2% growth clocked in December. It beat a 5% expansion forecast in a Reuters poll and marked the quickest growth since September last year.
The figures follow data showing China’s exports blew past forecasts in the first two months, powered by surging AI-related technology demand that also lifted upstream manufacturing.
Retail sales, a gauge of consumption, jumped 2.8%, quickening from the 0.9% pace in December for their biggest gain since October last year. Analysts had expected a 2.5% growth.
The strong impetus was driven in part by the country’s longest Lunar New Year holiday in February. The festivities helped boost total tourism spending by almost 19% from the same holiday period last year, which was one day shorter. But domestic tourism spending per trip dipped 0.2%, suggesting consumers remain cautious.
Data from earlier last week showed passenger vehicle sales at home tumbled 26% year-on-year in January-February, hurt by the end of a tax break and scaled-back government subsidies for electric vehicles.
China combines January and February data releases to smooth out distortions from the festival holidays, which can fall in either month.
Monday’s data provided another encouraging sign for policymakers as an unexpected upturn in investment took some of the sting off the challenge of a protracted downturn in the critical property sector.
Fixed asset investment, which includes property and infrastructure investment, expanded 1.8% in the first two months, versus expectations for a 2.1% drop. It fell 3.8% in 2025, the first annual drop in about three decades.
The overall data, while showing some positive momentum, still suggest a wide gap between robust external demand and sluggish household consumption that analysts warn could hamper China’s long-term growth prospects. Last week’s lending data pointed to a continued slump in household borrowing.
At the annual parliament meeting that closed last week, policymakers set this year’s economic growth target at 4.5%-5%, down from last year’s “around 5%”. The target was met in 2025 largely on the back of a record trade surplus of just over $1 trillion, deepening unease among China’s trading partners.
Analysts say China faces significant challenges as it tries to foster sustainable longer term growth.
While the government pledged a “notable” lift in household consumption, it spelled out few measures to suggest a turn toward aggressive demand-side reforms.
The Middle East conflict adds a fresh layer of uncertainty, pushing up energy prices and unsettling global trade.
“With tensions in the Middle East… no turnaround in the property sector, and declining domestic sales of durable goods, including autos, mobile phones, and home appliances, the great divide (between external and domestic demand) is set to become more pronounced in 2026,” Nomura economists said in a research note last week.

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WRAPUP 1-China's economy enters 2026 on firmer footing as risks build