China's economic growth rebounded more than expected in the first quarter of 2026, with GDP expanding 5.0% year-on-year in January-March, according to data released by the National Bureau of Statistics (NBS) on Thursday. As reported by The Times of India, this marked the fastest pace in three quarters, surpassing the 4.8% median forecast of economists and above the 4.5% growth recorded in the previous quarter. The NBS stated that China's economy "achieved a strong start to the year, further demonstrating its resilience and vitality." The 5% growth rate sits at the top of China's full-year target range of 4.5-5.0%, highlighting a resilience that sets it apart from much of Asia, helped by ample strategic oil reserves and a diversified energy mix. According to CNA, the quarterly growth of 1.3% in January-March was in line with polls and compared with 1.2% growth in October-December.
Despite the surge in global energy prices triggered by the US-Israel war on Iran, which disrupted shipping through the Strait of Hormuz - a critical route for about a fifth of the world's oil and natural gas - China's economy showed remarkable resilience. According to The Times of India, analysts noted that China's diversified energy supply has helped shield it from immediate shocks, though a prolonged conflict could weaken global demand and impact exports. The International Monetary Fund recently cut China's 2026 growth forecast to 4.4% from 4.5%, warning the global economy could be "thrown off course" by the Middle East conflict. As per Reuters, the Middle East conflict lays bare a core vulnerability: an export-led growth model that delivers annual trade surpluses the size of the Dutch economy depends on open sea lanes - for China and for the customers it sells to. As per CNA, China is vulnerable to an oil shock already slowing trade, lifting factory costs and darkening the outlook for the year as the world's biggest energy importer and a heavily export-reliant economy.
The first-quarter growth momentum was largely driven by exports, as noted by Zichun Huang of Capital Economics to news agency AFP. China maintained a $1.2 trillion trade surplus last year, with outbound shipments remaining strong. However, recent data showed export growth slowed sharply in March, with exports growing just 2.5% last month, slowing from 21.8% in January-February. According to CNA, exports still rose 14.7% for the January-March period from a year earlier, well above the full-year growth of 5.5% in 2025. At the Canton Fair in Guangzhou, Chinese exporters and Middle Eastern buyers told AFP that the conflict has already dented orders and pushed up prices. As per Reuters, Peng Xin, general manager of Guangdong Rongsu New Materials, reports that prices for two types of nylon spiked roughly 40-60%, with the entire industry chain under pressure. "The current coping method is to negotiate the price for every single order. If you accept my price, we cooperate. Otherwise, there's nothing we can do," Peng stated. As per CNA, factory-gate prices rose in March for the first time in more than three years, signalling that energy-driven cost pressures are seeping into the world's second-biggest economy and threatening already-thin corporate margins.
While exports supported growth, domestic indicators showed mixed results. According to The Times of India, retail sales rose 1.7% year-on-year in March, falling short of expectations of 2.4%, while industrial production grew 5.7%, beating estimates but moderating from earlier months. The retail sales growth of 1.7% in March was down from 2.8% in January-February, and as has been the norm in recent years, underperformed industrial output. According to CNA, growth of fixed-asset investment eased to 1.7% in the first quarter from 1.8% in January-February - when infrastructure investment jumped 11.4% year-on-year. The retail sales figure was also distorted by seasonal factors, as noted by analysts. The IMF noted that China's domestic activity, especially in the housing sector, continues to lag behind exports. Beijing has set a growth target of 4.5-5.0% for 2026, the lowest in decades, amid a prolonged property sector crisis and weak domestic consumption. Fresh data showing new home prices still falling suggests further pain for the country's embattled developers.
Despite the strong Q1 performance, economists warned of potential challenges ahead. As reported by The Times of India, Wang Jun, deputy head of China's customs administration, acknowledged rising risks, citing "many uncertainties and instabilities in the external environment." According to CNA, economist Tommy Xie expects Q1 results to be the strongest of the year, with growth likely to ease to around 4.8% in the next quarter. As per Reuters, Dan Wang, China director at Eurasia Group, warns that "the net exports' contribution to Chinese growth could turn negative in the second quarter." If that happens, then domestic infrastructure spending and fiscal spending will step up in order to bridge the gap. As per CNA, fiscal expenditure rose 3.6% in January-February, picking up from a 1% increase in 2025 and adding to signs of stronger fiscal support. "The solid start to the year on the back of strong export performance suggests the direct impact of the Middle East conflict remains contained for now," said Junyu Tan, North Asia economist at Coface. "But the outlook is not all rosy despite China's relative resilience."
