China’s economy grows 5% in Q1, beating forecasts

China’s economy grows 5% in Q1, outpacing forecasts

Official data released Thursday shows the world’s second‑largest economy expanded ↑ 5% year‑on‑year in the January‑March period, eclipsing the 4.5% growth recorded in the previous quarter. The surge comes as the nation appears to have insulated itself from the early shockwaves of the Iran war, which entered its seventh week.

Quarter‑on‑quarter momentum

On a quarterly basis, output rose ↑ 1.3%, the fastest pace in twelve months, suggesting domestic drivers remain resilient despite external volatility.

Industrial production in March climbed 5.7% YoY, buoyed by robust demand for electronics, automobiles, semiconductors and robotics. By contrast, retail sales slipped to 1.7% YoY, a slowdown from the 2.8% recorded in the first two months, highlighting lingering weakness in consumer confidence.

“China can likely weather short‑term disruptions, but a protracted conflict and sustained high energy prices would start to bite later this year,” warned Lynn Song, chief economist for Greater China at ING.

International Monetary Fund projections have been trimmed to a 4.4% expansion for 2026, reflecting broader global growth concerns linked to the Iran war’s impact on energy markets and inflation, according to Reuters. Nevertheless, Beijing’s growth target of 4.5‑5% for 2026 remains within reach, provided policy stimulus sustains momentum.

Export performance offers a mixed picture: March shipments rose 2.5% YoY, yet the pace decelerated sharply from February, a shift analysts partially attribute to seasonal factors, data reported by Bloomberg. Cornell’s Eswar Prasad cautioned that “global demand for Chinese goods is contracting as economies grapple with the war’s fallout.”

Looking ahead, a boost in public‑sector investment could shore up headline growth, but without a rebound in household consumption the economy may grow increasingly reliant on external markets, heightening exposure to downstream shocks.