SCIO briefing on China's economic performance in Q1 2026

CNBC:

I have two questions. One is whether the impact of rising oil prices has any impact on China's economy? And the second is how are the situation in the Middle East affecting China's exports and their ability to drive China's domestic growth? 

Mao Shengyong:

Thank you for your questions. First, the effects of rising oil prices in March on the economy. One impact was on prices. As mentioned earlier, the PPI turning from negative to positive can be attributed to three factors. First, the balance between supply and demand in the industrial products market has been constantly improving; second, the market order has continued to be optimized; and third, the international environment has also had an impact. Of these three aspects, the domestic impact has played a more significant role. Judging from the CPI trend in the first quarter and recently, the overall price situation was generally stable, with consumer prices rising moderately. Looking at the quarterly data, the CPI rose by 0.9% year on year in the first quarter, an increase of 0.4 percentage point compared to the fourth quarter of last year and 0.9 percentage point compared to the whole of last year. The growth has been accelerating for two consecutive quarters, and the quarterly increase is the highest in nearly three years. The core CPI, excluding the prices of food and energy, went up by 1.2% year on year. Looking at the monthly data, the CPI rose by 1% year on year in March, while the core CPI rose by 1.1%. The year-on-year increase has remained stable above 1% in recent months, so the CPI continues its moderate upward trend.

Has the increase in oil prices had any impact? Let me explain in detail. Among the major components of CPI, food constitutes a significant proportion. In the first quarter of this year, food prices rose by 0.4%, compared to a 1.5% decrease over the whole of last year. The second component is industrial consumer goods. Prices of industrial consumer goods excluding energy rose 2.5% in the first quarter, 1.4 percentage points higher than the whole of last year. In the first quarter of this year, energy prices (including gasoline) fell by 2.5% year on year, but compared with the whole of last year, the decline narrowed by 0.8 percentage point. In the first quarter, service prices rose by 0.8%, 0.3 percentage point faster than the whole of last year. These four components all share a common characteristic. That is, compared with the whole of last year, either the increase has rebounded or the decrease has narrowed, by modest margins, indicating that CPI is rising moderately. Moreover, as you can see, changes in gasoline and crude oil prices have had a relatively small impact on CPI, which is the question the reporter just raised. They have had some impact on PPI, but they have not been the main influencing factor. They have had some impact on CPI, but the impact has been relatively small. Based on the economic growth in the first quarter, the period got off to a good start, with economic growth and various indicators showing relatively stable performance. The changes in crude oil prices, for now, have had a relatively small impact.

What impact will the changes in the Middle East situation have on us? First, from the perspective of the basic conditions for economic development, we are well-positioned to maintain steady growth. Based on the information currently available to us, the factors and core drivers that underpinned economic growth in the first quarter will remain in place and provide support for a relatively rapid growth rate in the coming period. Second, traditional industries have still maintained steady growth. Regarding the impact on exports, on the one hand, there may be some impact. As a major country deeply integrated into the global economy, China is bound to be affected to some extent. On the other hand, we still have advantages: a complete industrial chain, better energy mix and more abundant supporting conditions, making our exports more resilient. Therefore, although there may be some impact, overall, it will be limited and controllable. Of course, we still hope that the situation will stabilize as soon as possible, which will be conducive to the better recovery and development of the global economy. Thank you.