China's economy grows at 5% in first quarter, shrugging off initial
impact of Iran war
[April 16, 2026] By
CHAN HO-HIM
HONG KONG (AP) — China’s economy accelerated in the first quarter of
this year, expanding 5% from a year earlier as it largely shrugged off
impacts from the Iran war so far, according to data released Thursday.
The January-March data released by the government, covering a period
during which the Iran war began, was better than what economists
expected and was up from the 4.5% growth seen in the October-December
quarter.
On a quarter-on-quarter basis, China's economy grew 1.3% in the first
three months from the final quarter of last year, the fastest pace in a
year.
Economists expect China, the world's second largest economy, to be able
to weather short-term impacts from the Iran war, now in its seventh
week. The war is pushing energy prices higher, worsening inflation and
impacting global economic growth. But longer term, areas including
global demand for Chinese exports could take a hit.
The International Monetary Fund this week trimmed its economic growth
estimates for China to a 4.4% expansion for 2026 as it lowered its
global growth forecasts over Iran war shocks. Chinese leaders last month
set an economic growth target of 4.5% to 5% for this year, the slowest
since 1991.
“China can likely weather short term disruptions, but a protracted war
and higher for longer energy prices would likely start to bite into
growth by the second half of the year,” said Lynn Song, chief economist
for Greater China at Dutch bank ING.
Also on Thursday, government data showed industrial output in China rose
5.7% in March year-on-year, better than market expectations, as global
demand for Chinese exports of electronic equipments, autos,
semiconductors and robotics remained strong.
Retail sales were up 1.7% from a year earlier, worse-than-estimates and
slower than the 2.8% growth in January and February, reflecting sluggish
domestic demand for consumer goods.
A years-long real estate sector slump in China has dragged consumer and
investor confidence, but the country managed to achieve its targeted
“around 5%” growth last year, powered by robust exports that drove its
trade surplus to a record nearly $1.2 trillion despite U.S. President
Donald Trump’s higher tariffs.
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A vendor attends a visitor at the iDO tech booth showcasing it smart
watches at the Canton Fair, in Guangzhou, in southern China's
Guangdong province, Wednesday, April 15, 2026. (AP Photo/Andy Wong)
 China's exports will continue to be
key in propelling its economy this year, economists believe, but
reliance on export growth could now increasingly become a problem.
"The lack of a speedy resolution to the Iran war is likely to dent
global growth, which will negatively impact other economies’ ability
to absorb Chinese exports,” said Eswar Prasad, a professor of
economics and trade policy at Cornell University.
“At a time when all countries are trying to protect their firms,
households and economies from the fallout of the Iran war, the
appetite for Chinese imports is clearly shrinking,” he explained.
On Tuesday, China reported its exports grew 2.5% in March from a
year ago, significantly slowing from the previous two months
although some analysts partly attributed that to seasonal
distortions.
China could likely still attain its full year economic growth target
of 4.5% to 5% for 2026 through policy stimulus measures, economists
say, but there are other concerns.
A boost in public sector investment, Prasad said, would stabilize
headline growth but, unless household demand strengthens
significantly, could intensify underlying deflationary pressures and
increase the economy’s reliance on exports down the line.
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