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TD Securities analyst Alex Loo highlights that China's economy began 2026 with strong momentum, driven by unexpected growth in industrial production, exports, and a rebound in fixed-asset investment fueled by quasi-fiscal policies. However, the report warns of emerging risks from volatile oil prices and escalating geopolitical tensions with the US, which could disrupt supply chains and dampen global demand for Chinese goods. These factors may pressure Beijing to recalibrate its economic strategies, particularly in energy and trade sectors. For markets, the analysis underscores the interconnectedness of China's economic health with global commodity prices and US-China relations. Traders should monitor oil price fluctuations and potential policy responses from both nations, as these could influence trade flows, inflation, and equity valuations. The US dollar and oil-linked assets may face directional moves depending on the trajectory of these risks. Looking ahead, investors should watch for policy adjustments in China’s quasi-fiscal measures and how geopolitical frictions impact multinational corporations. The report also suggests that energy market volatility could extend into 2027, with implications for commodity-linked currencies and Gulf economies reliant on oil exports.
