China's economic outlook 2026: Growth, innovation, supply chains and consumer trends

[00:00:00] Wang Jiyuan: Hello and welcome to The Hub. I'm Wang Jiyuan sitting in for Wang Guan. The International Monetary Fund projects the global economy will grow by around 3.1% in 2026. Recent manufacturing and trade data from several major economies also point to a gradual recovery. Yet, the global outlook remains clouded by geopolitical tensions, policy uncertainty and persistent market volatility. Even so, supply chains remain deeply interconnected and businesses continue to pursue growth opportunities across borders. Against this backdrop, China is hosting a series of major international events, including the fourth China International Supply Chain Expo from June 22 to 26 in Beijing. As global businesses gather in Beijing for the CISCE, record participation is underscoring the enduring appeal of China's market and its role in global supply chains. Meanwhile, with the Dragon Ball Festival holiday, Booming travel and consumption are offering another glimpse into the strength of domestic demand. So, what is driving the latest signs of recovery in the global economy? Why are international companies continue to deepen their engagement with China? And what do strong holiday spending and consumer confidence tell us about the resilience of the Chinese economy? How are global supply chains evolving amid growing uncertainties? And what do these developments tell us about China's economic outlook and its role in global growth? To discuss these questions, we are joined at this hour in Hong Kong. In Beijing, we have Andy Mark, author of The Innovation Machine: How China Creates and Adopts Technology Through Governance. And in Beijing, Zhang Gong, Professor of Economics at the University of International Business and Economics. Welcome to the program, gentlemen. Mr. Zhe, the latest World Economic Outlook published by the IMF expects the global economy to grow by around 3.1% in 2026. While the recovery is gaining momentum, geopolitical tensions, trade frictions and policy uncertainty remain key risks. How durable do you think their current recovery is? [00:02:31] Andy Mark: The overall global situation is, of course, very unstable and uncertain. We have military conflicts in certain parts of the world, and it is affecting the economics of many countries, including that of China, frankly. But, of course, China so far has been, you know, weathering the challenges quite well in general relative to many other countries. So I would expect in the short term, there's still going to be quite a bit of volatility and a lot of uncertainty. And businesses will just have to, you know, take all this into account when they're planning for the future of the business. [00:03:08] Wang Jiyuan: Mr. Mok, China's GDP expanded by 5% year on year in the first quarter of 2026. Retail sales have continued to grow while goods trade reached a record high for the same period. How important is China's economic performance to the broader global recovery story? [00:03:28] Zhang Gong: Well, Ji Yuan, I think China's economy and its growth really are the engine powering the global economy. Because if we look at this global GDP growth number, it is an average that probably hides as much as it reveals, because it really is a very mixed picture. Because if we look at China's growth of 5%, I think 5.4% is the target, that actually adds a trillion U.S. dollars of output. And this is equivalent to a Switzerland or Saudi Arabia, if we were looking at national GDPs. And you combine that with, what, a 1.2 trillion U.S. dollar trade surplus. You know, China, again, the numbers in absolute terms are really quite remarkable. And if we compare that to the United States, which, while it does have a larger economy in nominal terms at almost 30 trillion U.S. dollars, only added about 600 billion to the global economy. So if we look at it from that perspective, and not just in percentages, which is actually kind of misleading, and I think leads to some really deeply misleading framings by Western media of China's economy being floundering, failing, et cetera. If we look at the absolute numbers, again, a trillion U.S. dollars in growth, it's really a very large number. [00:04:55] Wang Jiyuan: Professor Gong, over the past several years, we've had this de-risk or decoupling narrative going on. It dominated the global discussion about economics and supply chains. But from what we are seeing, I think the reality shows that this is a much more complex story than a simple separation narrative would suggest. So how would you assess the real direction of industrial and supply chain restructuring today? [00:05:23] Speaker 4: Well, I think this strategy's policy is mostly coming from Washington. You know, Washington has this idea that somehow it can decouple or de-risk from China. But I think, you know, after a few years of back and forth, after a few years of, you know, the so-called trade war started by the first Trump administration, inherited by the Biden administration, and to some extent also continued by President Trump after he took over the power in the second term, the White House administration is coming to the realization that this is not easy. It's impossible. You know, somehow the two countries, the two countries are totally intertwined, and it's very difficult to achieve its objective. And this idea is culminated by the summit meeting between President Trump and President Xi. Now we have essentially a trade war truth. And as a matter of fact, the Sino-US trade is starting to recover last month, and actually the month before last month as well. Now, I think the European side are still not converted. You know, it looks like the European Union spearheaded by France in particular is contemplating starting a trade war with China. China, I think pretty soon they're going to find out that it's not going to be any more different from the American experience. Nevertheless, you know, it's a world that indeed is seeing, you know, the challenges from this kind of protectionist deglobalization trend. And, of course, China, you know, as the forefront of resisting that, that movement and, you know, have to see what's going to happen with respect to the China European relationship. But overall, if you look at, you know, China's trade picture, it has been steadily rising, even amidst all these very antagonistic policies coming from the West. It goes to show that China's economy is very resilient, China's export sector, trade sectors are very resilient. And I think we should continue on this path moving forward. [00:07:37] Wang Jiyuan: Speaking of China's resilience, Mr. Ze, Beijing is hosting the fourth China International Supply Chain Expo. It brings together participants from 85 countries, regions and international organizations, along with more than 1,200 exhibitors and industry partners. Many companies have returned here year after year. What does this level of participation tell us about the appeal of the Chinese market for the global business? [00:08:07] Andy Mark: It's incredible. Actually, in the last month and a half, I've been very busy because as a strategy consultant, I've been receiving quite a number of visitors, mainly from multinational companies who were visiting China for different reasons. But in general, the multinational corporation executives now are very excited to learn about China's ability to continue to manufacture, to go up the value chain, become innovative, and it's very fast in doing things. And also, everyone would ask to get a ride on the high-speed train to get a feeling of the Chinese most innovative transportation mode. This actually, to me, that signifies the "return" or the increased interest of multinational companies on China. But the topic of the discussion is no longer just about the China market. To many of these companies, the China market, of course, is very important. But increasingly, it's also the importance of the supply chain, as we were just talking about, that China's position as the epicenter for global supply chain has actually been strengthened over the last years. And also, China has become a source of innovation and actually an inspiration and source of knowledge for a lot of companies. So I think from that respect, the attention from multinational companies on China has actually heightened during this period, and they are finding that the role of China has evolved from only being a market for many, but now into more of a role for a more global perspective. [00:09:56] Wang Jiyuan: Following that, Andy, I'd like to ask you how China's performing as that source of innovation and that epicenter in the supply chains. [00:10:05] Zhang Gong: I think it's well recognized that China is rapidly moving from being the workshop of the world to, you know, made in China. It's moving to designed in China, and that's very well, I think, understood. What's less understood, I think, is a different ontological understanding of supply chains, meaning what is reality. So in the U.S. and in the West, when people talk about supply chains, they're using this as a metaphor for a series of steps that are largely independent. But China sees this as one integrated entities, and we see China doing things like having supply chain chiefs, digital twins, and of course, this expo, as well as a manifestation of this understanding that supply chains are a discrete entity or object that can and need to be managed. And the last thing I would say about this is that we're rapidly moving into an AI-driven economy, and we have to understand artificial intelligence first as an energy technology before it is an information technology. Because you can have the most advanced chips in the world, you can have the most cutting edge AI models, but if you don't have enough electricity to power the data centers in which the chips sit, you really aren't going to get very far. And China has installed capacity of something like 3.89 terawatts of electric capacity, that has increased 16%. And we compare that to the United States, which is about 1.4 terawatts, that is growing in the low single digits. So I think this is setting the stage for the next era of AI power growth. And I think supply chains are, of course, going to continue to be a vital part of that. [00:11:57] Wang Jiyuan: So over the past several years, I think we've all seen stories about how companies are becoming less confident in China because of this de-risking and decoupling narrative coming from the West. But I think from all the corporate reportings from their investment announcement and participation in the fair, it shows that it's not exactly like that. The confidence in China is still pretty high. So, Professor Gong, I'd like to ask you, what's driving this renewed confidence or can we even call it renewed? [00:12:31] Speaker 4: Well, first of all, I think you're absolutely right that this narrative about China is coming back. It's totally changed. And the question about what's driving this, I think that a couple of reasons. One thing is that people start to realize that this is a fast-evolving market representing a lot of frontier technology development. You know, Andy referred to AI and other things. I think it's more than that. I think there are also other technologies in the biotech. For example, you know, a large portion of the new drugs are actually coming from China today and other areas. I generally characterize them, put them, lump them together as called, you know, frontier technologies. China is the center of activities for these things. One of the centers, let's put it this way. In other words, you know, for large foreign companies, multinational companies to be riding this technology wave, you have to be present in this market here. I think probably, you know, the ability to innovate, the scale of innovation and also the scale of commercialization of these innovations here in China, are probably the driving forces for renewed interest by foreign companies to continue to investigate in China. And there are other reasons as well. For example, you know, China's economy has been coming back and, you know, China's, you know, look at the production of the hardest items today. You know, EVs, for example, the automobile industry is clearly migrating to China. The center of that is migrating to China. China is becoming like the 1930s United States in a sense that it's the center of actions, basically. You have to be there. So, you know, I think this is probably on the minds of a lot of CEOs of multinational companies right now. [00:14:22] Wang Jiyuan: Years ago, many multinational companies follow this China for export strategy, which means manufacturing in China and then selling it to the world. And later, the focus shifted to this China for China, which means producing locally for the Chinese consumers. But today, an increasing number of firms are embracing this China for global model, which means it used China as a base for innovation, for R&D and for global market development. What does this show us about China's evolving role in the global economy? [00:14:57] Andy Mark: Well, if we get into a new world, a new world that has been defined as a multipolar world, China's role in this new world is going to be even more important for the reason we already have discussed. It's not only a market, it's not only, you know, the epicenter for supply chain is increasingly become the epicenter for innovation and also an exporter of capital, very importantly. And also the Chinese companies are now becoming very international in many places. We see the presence of Chinese companies. So for many multinational companies, they see all this. Some of them, some of them will see this as a threat because the Chinese companies can become the competitors. Some of them will see that as a real benefit because they see both the Chinese capability as well as the Chinese companies potentially as a source of a complementarity for them. In other words, multinational companies are now beginning to see that if they try to work and partner with Chinese companies, they actually can leverage the Chinese capabilities to enhance their own global capabilities so that they become more competitive on a global basis. That is the new role for China going forward. And so in fact, I published a new book back in October last year, which this is the theme of my book. The subtitle of my book, the main title of my book is called China in the New World. The subtitle of my book is called All Global Companies Must Put China at the Core of the Global Plans. And this is the theme. This is that theme that I was talking about. [00:16:38] Wang Jiyuan: So this year's Expo sends a powerful message that the technologies showcased here from AI to new energy prove that China's supply chains are no longer just about massive scale. They are about systematic agilities. So, Andy, here's the question. We've looked at this from the outside's perspective, from the Western's perspective, from the international companies' perspective. But how is the technological spillover from China's innovation hubs are forcing the multinational corporations to rethink their strategy, which means that in a world obsessed with this derisking narrative, how is China's leap into advanced tech? Actually redefines the future of global collaboration? [00:17:24] Zhang Gong: Well, Jiyeon, it actually is redefining the future for companies, countries all around the world. And I think the best way to, well, first I would say is to better understand how the outside world is reacting to this. Look at what people do and not what they say, as Edward and John, I think, very authoritatively shared that, you know, the numbers all show that everyone is engaging with China, not trying to leave China, despite, you know, whatever we might read in the Western media. But from the Chinese perspective, you know, in my book, I introduced this I-5 model, which explains how countries can go from an idea to impact by first creating and giving responsibility to the appropriate institutions that then create the effective instruments, whether these are government policies, etc. that then lead to the physical infrastructure that must be built, whether that's a power plant, a highway or a data center, which then leads to the impact. I think it's kind of what China is kind of doing with its really remarkable technological advances on all fronts. Artificial intelligence, John talked about biotech in space. You know, I think we're looking at some exciting new developments soon in quantum computing. You know, I think there's a lot of excitement about smart robots as well. But it really is this ability to go from idea assigning responsibility and custody to the appropriate institutions, so on and so forth, without any loss of fidelity between each of the stages. And I think this is, you know, again, I think more and more governments as well as academics around the world are starting to realize that what China has accomplished is not magic. What it really is is governance effectively applied. And again, I think my I-5 model, somewhat like Michael Porter's Five Forces analysis, providing a vocabulary, a grammar and a syntax for competitive corporate strategy, that my model provides a way for governments, investors, academics to really more effectively understand and talk about what China is doing in terms of technology. And it really is governance and it's not magic. [00:20:00] Wang Jiyuan: Well, let's throw some festivities into the conversation. China, we just celebrated the Dragon Boat Festival and I hope you all had a very good three days off. The holiday delivered strong tourism and consumer spending figures. You know, in recent years from Zibo's barbecue phenomenon and the Harbin's tourism boom to the rise of these county-level tourism, and also the concert economy, there is a new trend of consumption coming up in emerging across China. What do these developments reveal about the structural changes taking place in China's market? Perhaps, Andy, let's start with you. [00:20:43] Zhang Gong: China's consumer market is going through a recognizable and predictable series of developments. So, you know, most markets start out undifferentiated. If we look at the automobile market, it started with the Model T from Ford, where you could have any color you wanted as long as it was black, to General Motors offering Chevrolets to Cadillacs. And I think what we're seeing in China today is this differentiation of consumers, especially the youth market, into, I would say broadly, three segments. One we could call the county cosmopolitan. So these are the young people in third, fourth tier cities that have low absolute incomes, but also a very low fixed cost as well. So they have a lot of disposable income, especially when you look at it in the aggregate. And I think for people like this, it's become not should I travel, but where should I go? So I think this is, you know, what we're talking about primarily today. But I think it's also important to point out another segment that I would call maybe the curators. So these are the urban, mostly professionals living in tier one cities that are house rich. Now, today, of course, they're less house rich than they were, say, 10, 15 years ago. But this doesn't mean that they don't have also enormous purchasing power, but they are much more value based. And they're also willing to splurge, sometimes remarkably, on things they particularly like. And then I would say the final market would be what I would call maybe the romantics. And this would be the younger people that buy mostly for emotional fulfillment. So they care more about the story, the brand, rather than any tangible product functional elements. And again, you know, this is a very natural phenomenon. And I think this is also why many, many foreign companies around the world really are watching China, not just to make money, but also to better understand what the global development of the consumer market will look like. Because we shouldn't forget that the global south is many, many billions of young people as well. And more and more, they're looking to China for what is cool, what is fashionable and, you know, what is desirable. [00:23:17] Wang Jiyuan: Professor Gong, I'd like to get your take on this question. How are these emerging trends reshaping China's consumer market? [00:23:24] Speaker 4: Well, I think the trend of consumption in China is following the footsteps of any developed country's trajectory of consumption evolution. You know, you start from basically first filling your stomach, a lot of Spanish and foods and move on to other things like automobiles, getting a condo, you know, those, these touchable products. Right. And then you move on to, you know, luxury items like buying a bag, you know, drinking expensive liquor, stuff like that. Eventually you move on to things on services, right? You want to travel, you want to see the best part of the world, you want some experiences in other things. And, you know, it's an evolution trajectory. China is exactly following that path. One example I can give you to you is that, you know, even amidst sort of, you know, I would call it anemic number about retail numbers of real products. Look at the expenditures, the market size growth of, you know, of money spent on our pets. How many families go out and go out and, you know, raise a cat or dog? I mean, this market is exploding, right? So, you know, you don't think about these things 20 years ago, but now people are spending money on these things. So I have a, really, I have a problem with the, you know, the Statistics Bureau's method of collection statistics. You know, I think they're still in the mindset of how many things people buy. I think, you know, it goes beyond that. I think it's, you know, people are spending money on things published, not even the statistics produced by the National Statistics Bureau. So I think it's a fundamental change, not surprisingly, and very predictably towards the path as any developed countries have experienced in the past. China is, at the end of the day, becoming more and more like a developed country, a developed economy. And we're getting very close to that camp. [00:25:24] Wang Jiyuan: Mr. Zha, Andy touched upon this a little bit about the younger generations. Policymakers have introduced a lot of policies to boost consumptions. From your perspective, what additional policy measures could be better aligned with and the preferences of the younger generations that we're seeing right now? [00:25:47] Andy Mark: To follow up to what Andy was talking about, I think there's incredible latent consumption power in China. It's just a matter of whether or not there's availability of the right kind of products, right kind of services that can get the consumers to be excited and to purchase the product and all the services. I think in the cases that you mentioned earlier like the Jibo, you know, Jibo Barbecue Festival and also the Harbin, the, you know, the snow, the ice festival and so on. Those are, those events were created in order to turn the latent demand into real demand. The young consumers are very active. They are, of course, very curious about the world, but they're also very tech savvy increasingly. They're using technology much more. So you need to connect with the young people with technology. You know, I say China, especially on the tourism side that you just mentioned, China is an incredible asset. We, you know, we have a big country in terms of size. We have a lot of latent assets in tourism. It's just a matter of how to develop those spots into real tourism spots and turned it into attractive destinations, especially for young people. And, you know, because of that, actually China's room for domestic consumption is incredible as a part of the dual economic circulation. So China is not only relying on the external trade, which is doing well, but China also have an incredible potential in the domestic or internal circulation through many of this kind of means. [00:27:39] Wang Jiyuan: Professor Gong, I'd like you to wrap this conversation up for us. So what's your take taking all that we've discussed? What's your take on the current state of the Chinese economy? I think we are tugging along. [00:27:50] Speaker 4: I think the first quarter is doing great. The second quarter starting to see a little bit of a pulling back. But I think we're still very much on target to achieve the set goal of, you know, somewhere between 4.5 to 5% growth. I think, you know, the government is going to roll up further policies to stimulate economy from both the fiscal side as well as the monetary side. So I think, you know, in conclusion, we're definitely going to be on target to achieve our stated economic growth target for this year. [00:28:24] Wang Jiyuan: Well, thank you everyone for that lively discussion and I hope you had a nice holiday and happy returning to work. So that's it for this edition of The Hub. Thank you all for tuning in. I'm Huang Jiyuan sitting in for Wang Guan. Our news coverage continues on CGTN. Bye now and take care. [00:28:44] Speaker ?: .