China shrugs off Iran war as economy grows by more than forecast

16th Apr 2026 08:36

(Sharecast News) - China's economy grew by more than expected at the start of the year, official data showed on Thursday, despite the impact of war in the Middle East.

According to the National Bureau of Statistics, GDP rose 5.0% year-on-year in the three months to March end, up on February's 4.5% and ahead of consensus for growth of 4.8%.

On a quarter-on-quarter basis, GDP grew 1.3%, in line with forecasts.

Retail sales rose 1.7%, down on the 2.8% expansion seen in the first two months of the year and below expectations for a 2.3% uplift. The house price index also remained under pressure, at -3.4%.

However, industrial production spiked 5.7%. While that was weaker than February's 6.3% increase, it was ahead of forecasts for 5.5%.

The outbreak of war in the Middle East at the end of February has sent global energy prices soaring, reigniting inflation fears. Supply has also been constrained, with refineries in the region either damaged or shuttered, and both Iran and the US seeking to block the vital Strait of Hormuz. Asian countries have been particularly badly hit by the geopolitical turmoil.

Lynn Song, chief economist, Greater China, at ING, said: "China produced a solid first-quarter GDP read, as strong tertiary industry growth and solid industrial activity helped offset still sluggish consumption and investment and a drop in the first-quarter trade surplus."

However, she warned: "China is well-placed to weather short-term disruptions, but could face more pressure if energy prices remain higher for longer. We could see a greater impact of higher prices on import costs and input costs in the months ahead."

Lisheng Wang, China economist at Goldman Sachs, said: "First-quarter GDP and March activity data were mixed amid the global energy shock, and the breakdown suggests China's economy remains bifurcated, with strong manufacturing and exports but weak housing and consumer spending.

"We maintain our 2026/27 full-year real GDP growth forecasts both at 4.7%. Better-than-expected macro data so far this year implies little urgency for significant policy stimulus in the near term and adds conviction to our low expectations for stimulus at the upcoming April Politburo meeting."

Beijing confirmed last month that it is targeting annual economic growth of between 4.5% and 5%. It previously had a long-standing target of 5%.