Policy Effects Overlapping with Extended Spring Festival Holiday, Consumption and Investment Growth Accelerates in January-February

Can AI’s endogenous economic momentum remain stable in the future?

On March 16, the National Bureau of Statistics released the economic performance data for January-February 2026.

In January-February, total retail sales of consumer goods reached 86.079 billion yuan, a year-on-year increase of 2.8%, accelerating by 1.9 percentage points compared to December of the previous year. Month-on-month, retail sales of consumer goods in February increased by 0.81% over the previous month.

During the same period, nationwide fixed asset investment (excluding rural households) totaled 52.721 billion yuan, a year-on-year increase of 1.8%, reversing the 3.8% decline for the entire previous year; excluding real estate development investment, fixed asset investment grew by 5.2%. By sector, infrastructure investment increased by 11.4% year-on-year, manufacturing investment grew by 3.1%, and real estate development investment decreased by 11.1%. Month-on-month, fixed asset investment (excluding rural households) in February increased by 0.39% over January.

Fu Linghui, spokesperson for the National Bureau of Statistics, chief economist, and director of the Department of Comprehensive Statistics on the National Economy, stated that overall, key economic indicators rebounded significantly in January-February, and the economy started well. However, external environment changes have deepened, geopolitical risks continue to rise, and many old problems and new challenges remain in domestic economic development and transformation, with some enterprises facing operational difficulties. Moving forward, more proactive macro policies should be implemented, tailored to local conditions to develop new productive forces, focusing on stabilizing employment, enterprises, markets, and expectations, to promote qualitative improvement and reasonable quantitative growth of the economy.

Policy measures to boost consumption combined with an extended Spring Festival holiday led to a clear recovery in consumption in January-February

Fu Linghui noted that this year, under the influence of policies promoting consumption and the extended Spring Festival holiday, market sales have rebounded noticeably, service consumption potential has been unleashed, and new consumption momentum has strengthened.

Data shows that in January-February, total retail sales of consumer goods increased by 2.8% year-on-year, accelerating by 1.9 percentage points compared to December of the previous year, and by 1.1 percentage points compared to the fourth quarter of last year; service retail sales grew by 5.6% year-on-year, slightly faster than the previous year by 0.1 percentage points, continuing to outpace merchandise retail sales; merchandise retail sales reached 75.815 billion yuan, up 2.5%, accelerating by 1.8 percentage points from December; catering revenue was 10.264 billion yuan, up 4.8%, with an acceleration of 2.6 percentage points from December.

Wang Qing, chief macro analyst at Dongfang Jincheng, believes that consumer marginal acceleration at the start of the year is due to: first, the early allocation of funds for old-for-new vehicle exchanges, policy mechanism optimization, and the continuation of old-for-new policies from January 1, 2025, ensuring smooth policy transition and orderly implementation. Additionally, as the old-for-new quota remained tight in the second half of 2025, the public may have been more eager to utilize subsidies early in the year, leading to concentrated consumption promotion effects in the first two months. Second, the holiday was extended by one day this year, which helped release consumer demand, especially in related goods and services, significantly boosting growth in these areas. Notably, service consumption is also a key focus of this year’s policies, including expanding personal consumption loans, providing interest subsidies to service industry operators, and implementing actions to improve service quality and benefit consumers.

Wen Bin, chief economist at Minsheng Bank, believes that overall, consumption in January-February showed moderate growth, mainly driven by holiday effects and subsidies, but the endogenous growth momentum has not yet been fully stabilized. Residents’ short-term loans decreased by 359.6 billion yuan year-on-year, a decline of 35.8 billion yuan compared to the same period last year, reflecting cautious consumer behavior.

Growth in investment has shifted from decline to increase, with all three major sectors showing improvement

In January-February 2026, fixed asset investment increased by 1.8% year-on-year, accelerating by 5.6 percentage points compared to the full year of 2025, turning from decline to growth.

Infrastructure investment in January-February grew by 11.4% year-on-year, after declining by 2.2% last year. Wang Qing believes that the significant rise in infrastructure investment exceeds market expectations, driven by: first, 2026 being the start of the “14th Five-Year Plan,” with major projects beginning early in the year; second, the government’s report of increased special local government bonds for project construction, ensuring more funding sources for infrastructure investment; third, the completion of 500 billion yuan in new policy-based financial instruments in October 2025, which has begun to boost infrastructure investment early this year.

Manufacturing investment grew by 3.1%, reversing the continuous slowdown seen last year, which declined by 2.5 percentage points. Wen Bin notes that the rebound in manufacturing investment in January-February is based on a high base of 9.0% last year, supported by policies for equipment renewal and a recovery in high-tech manufacturing sectors.

Real estate development investment decreased by 11.1%, but the decline narrowed compared to last year. Wang Qing explains that the narrowing of the decline is mainly due to improved funding sources for real estate companies, such as bank loans. Additionally, the base effect from last year and a possible reduction in land purchase costs included in real estate investment may also contribute to easing the overall downward trend.

What are the prospects for consumption and investment in the coming months?

Based on January-February data, the economy started well. Wen Bin states that this is partly due to policy effects, such as early issuance of special bonds boosting infrastructure investment, and initial signs of a “mini-boom” in the real estate market. It also reflects a rebound in endogenous momentum, supported by better-than-expected exports, continued price recovery, and a boost to manufacturing investment. The extended holiday also helped stimulate household consumption, especially in services.

However, Luo Zhiheng, chief economist and director of the Research Institute at Yuekai Securities, points out that the strong start in January-February partly results from seasonal effects related to the Spring Festival, and should not be overly optimistic. If March’s year-on-year data shows a significant slowdown, it should be carefully considered that the shift of the holiday effect from January-February to March may distort the data. It is advisable to analyze the combined data for January-March after the first quarter to more objectively assess the true trend and internal momentum of the economy.

Looking ahead, Wen Bin believes that the government’s work report continues to prioritize expanding domestic demand, emphasizing both stimulating residents’ endogenous consumption and implementing supportive policies, to sustain consumption growth. As policy effects become evident, consumption momentum is expected to gradually improve.

Regarding investment, Wang Qing expects that, as the effect of expanded investment is released, infrastructure investment growth in the first quarter will remain around 10%. The rapid deployment of an additional 800 billion yuan in new policy-based financial instruments later this year will provide strong support for infrastructure investment. Manufacturing investment growth may also slightly accelerate, especially in high-tech manufacturing. Additionally, with faster issuance of “white list” project loans and policies aimed at stabilizing the real estate market, the adjustment in the property sector is expected to ease, gradually narrowing the decline in real estate investment.

Luo Zhiheng suggests further strengthening reform measures and macro policies to convert policy effects into endogenous growth drivers. On the fiscal side, based on the initial deficit target, timely adjustments and additional budgets should be announced to ensure necessary spending. For monetary policy, a reduction in reserve requirements should be prioritized to lower commercial banks’ funding costs and guide market interest rates downward. Regarding real estate, market mechanisms should be fully utilized to stimulate housing demand and stabilize the market. Additionally, promoting reforms linking state-owned assets, finance, and social security—without increasing fiscal burden—by increasing state asset revenue contributions to the treasury and using these funds for social security improvements can raise urban and rural residents’ pension benefits, reduce their precautionary savings, and unleash consumption potential.