Hong Kong — China’s economy expanded by 5% year-on-year in the first quarter, according to official government data released Thursday, signaling stronger-than-expected performance despite early economic pressures linked to the ongoing Iran war and rising global energy costs.
The latest figures, covering January through March, show an acceleration from 4.5% growth in the previous quarter, suggesting that the world’s second-largest economy has so far absorbed external shocks better than anticipated.
Stronger-than-expected growth surprises economists
Analysts had forecast slower momentum due to geopolitical tensions and weaker global demand. However, the reported 5% expansion exceeded expectations, helping China stay aligned with its official annual growth target of around 4.5% to 5%.
Government planners had set the target earlier this year, marking one of the country’s most modest long-term growth goals in decades as structural challenges continue to weigh on the economy.
War-related pressures begin to emerge
While the early impact of the Iran conflict has been limited, economists warn that prolonged instability could weigh on China’s outlook in the coming months.
Rising energy prices driven by the conflict have added inflationary pressure globally, increasing production and transportation costs for major manufacturing economies, including China.
Experts say the full effect may take time to materialize, particularly if elevated oil prices persist and global demand weakens further.
Exports remain a key growth driver
China’s export sector continues to play a central role in sustaining growth, even as global trade conditions soften. Recent data showed export growth slowing, suggesting weakening demand from international markets.
Economists note that continued trade tensions and geopolitical uncertainty could reduce overseas appetite for Chinese goods, especially if global economic activity slows further.
Despite these headwinds, exports have remained a stabilizing force, helping offset weakness in domestic sectors such as real estate and consumer spending.
Structural weaknesses still weigh on the economy
China’s property market downturn continues to drag on investor confidence and household wealth, limiting stronger domestic consumption recovery.
Economists warn that while government-led investment and stimulus measures can support headline growth, long-term reliance on exports and public spending may deepen underlying economic imbalances if household demand does not strengthen.
Outlook remains cautious amid global uncertainty
The International Monetary Fund recently trimmed its forecast for China’s 2026 growth to 4.4%, citing global uncertainty and persistent domestic challenges.
Analysts say China is likely capable of meeting its near-term growth target through policy support, but warn that sustained global disruption—including from the Iran conflict—could weigh on momentum later in the year.
As geopolitical tensions continue to shape global trade and energy markets, China’s economic resilience will remain closely watched by investors and policymakers worldwide.
