China's exports in January and February increased by 21.8% in U.S. dollar terms compared to the same period last year, according to the Customs Administration in Beijing, far exceeding analysts' previous expectation of only 7.1% growth for the first two months. Industrial production rose by 6.3% in January-February, the fastest growth rate since September, while retail sales increased by 2.8%, more than three times faster than in December, according to China's National Bureau of Statistics. Economists had expected retail sales growth of 2.5% and industrial production growth of 5%, according to multiple reports. Fixed asset investment unexpectedly grew by 1.8% in January-February after shrinking for the first time ever in 2025, according to Bloomberg, and tourist spending during the Chinese New Year holiday rose by nearly 19% compared to the same holiday last year, according to multiple reports. Sales of alcohol, tobacco, communication equipment, and jewelry drove the increase in retail sales, according to Bloomberg. Economists at the think tank CF40 in Beijing believe the rapid recovery shows that macroeconomic policy is actively providing support, according to Bloomberg.
This strong start comes amid mixed trade performance, with China's exports to the U.S. in January and February falling by 11% compared to the same period in 2025, according to Beijing's customs data. Fresh figures show China's exports to the U.S. fell sharply by 26.5% in March compared to the same month last year, with China exporting $29.4 billion to the U.S. in March. In contrast, trade with European countries grew by 27.8% in January-February, and exports to ASEAN countries climbed by nearly 30% in January-February, according to official figures. China achieved a historic trade surplus of $1.2 trillion U.S. dollars in 2025, which is a thorn in the side of China's trading partners. Trade Minister Wang Wentao stated that China wants to implement a balanced development of imports and exports, and the low demand last year meant imports barely rose compared to exports.
Meanwhile, China's trade with North Korea surged 22% in the first two months of the year, reaching $418.7 million, according to China's General Administration of Customs. This rebound follows 2025 trade volumes reaching $2.73 billion, near the $2.79 billion recorded in 2019, pre-Covid levels. The top export from China to North Korea in the first two months of 2026 was human hair for wig making, valued at $24.3 million, down 26% from a year earlier, while Beijing exported 19% more soybean oil to North Korea, the second-largest category of exports. Shipments of tungsten ores rose to become China's second-largest category of purchases from North Korea at $15.4 million in the first two months of 2026, up from $3.29 million in January-February 2025. China is North Korea's largest trading partner, and the bilateral trade has helped shore up North Korea's sanctions-hit economy. The inter-capital train service between China and North Korea restarted from 12 March, and Air China announced it would restart flights to North Korea from March 30. The resumption of rail travel re-establishes a vital transport connection between North Korea and its principal economic ally, China, after being halted since the onset of the COVID-19 pandemic in 2020.
On the domestic front, infrastructure investment increased by over 11%, the fastest growth for the period since 2021, according to multiple reports. China set an annual economic growth target of 4.5%-5% for 2026, down from its 5% goal in 2025, and the government has promised measures to support weak consumption this year and in the five-year plan until 2030.
Potential threats loom from the Middle East conflict, as the rapid rise in foreign trade occurred before the U.S.-Israeli attack on Iran, which severely disrupted shipping in the region, especially in the Strait of Hormuz. First effects of the Iran conflict could show up in March data for China's foreign trade, and China imports mainly oil from Iran. The escalating war in the Middle East threatens to undermine China's economic recovery, according to multiple reports.
Upcoming diplomatic engagement includes U.S. President Donald Trump's expected visit to China in early April to meet his Chinese counterpart Xi Jinping, with Trump in China at the end of March. The trade dispute, in which there is still a pause, and the trade relationship between both countries are likely to be high on the agenda during Trump's visit. A year ago, China's foreign trade was still under the impression of tariffs from Trump, which led to a tit-for-tat with increases and counter-increases between the two largest economies in the world.
Structural economic challenges persist, as the world's second largest economy is heavily reliant on exports as it faces weak consumer spending, a shrinking population, and a property market crisis. Exports have been the key driver of China's economy, lifting it in spite of poor domestic spending and a property slump.
North Korea's relationship with Russia adds geopolitical complexity, as North Korea has supplied troops and weapons to Moscow in exchange for fuel and food supplies choked off by sanctions. Pyongyang's deepening relationship with Russia had sparked questions about the future of its ties with Beijing, but relations between China and North Korea had warmed after strain from Pyongyang's deepening links with Moscow, culminating in President Xi Jinping meeting Kim Jong Un last September – their first in six years.