BY EMMANUEL OGBONNA
China’s economy recorded a stronger-than-expected expansion in the first quarter of the year, signaling resilience even as geopolitical tensions and rising energy costs linked to the ongoing Iran war weigh on the global outlook.
Official data released Thursday showed that the world’s second-largest economy grew 5% in the January-to-March period compared with a year earlier. The figure exceeded economists’ expectations and marked an acceleration from the 4.5% growth recorded in the final quarter of last year.
On a quarterly basis, economic output rose 1.3% from the previous three months, representing the fastest pace of expansion in a year and suggesting that momentum carried into the start of the year despite mounting external uncertainties.
The data covers a period during which the Iran conflict began to intensify, driving up global energy prices and raising concerns about inflation and slowing international trade. While the immediate impact on China’s economy appears limited, analysts caution that prolonged instability could create headwinds in the months ahead.
Economists broadly agree that China has the capacity to absorb short-term shocks, supported by its industrial base and export strength. However, the longer the conflict persists, the more likely it is to dampen global demand, a key driver of China’s growth model.
Reflecting those concerns, the International Monetary Fund recently lowered its forecast for China’s economic expansion in 2026 to 4.4%, trimming expectations as part of a broader downgrade to global growth projections tied to geopolitical risks and energy market volatility.
Chinese policymakers have already set a relatively modest growth target of between 4.5% and 5% for the year, a range that would mark one of the slowest expansion rates for the country in decades. Still, the latest data suggests that the economy is currently tracking within that band.
Industrial activity remained a bright spot. Output rose 5.7% in March compared with a year earlier, outperforming forecasts as overseas demand held firm for Chinese-made goods including electronics, automobiles, semiconductors and robotics. The strength in manufacturing underscores China’s continued dominance in global supply chains, even as other economies attempt to diversify production.
In contrast, domestic consumption showed signs of weakness. Retail sales increased by just 1.7% year-on-year in March, missing expectations and slowing from the stronger growth seen in the first two months of the year. The softer reading highlights persistent caution among consumers, many of whom remain affected by economic uncertainty and a prolonged downturn in the property sector.
China’s real estate market, once a cornerstone of growth, has been under pressure for several years, weighing on both consumer confidence and private investment. Although authorities have introduced measures to stabilize the sector, a full recovery has yet to materialize.
Despite these challenges, China managed to achieve its growth target of around 5% last year, largely due to a surge in exports that pushed its trade surplus to a record level approaching $1.2 trillion. That performance came even as trade tensions with the United States intensified under policies introduced by Donald Trump, including higher tariffs on Chinese goods.
Exports are expected to remain a central pillar of China’s economy in the near term, but reliance on external demand is increasingly seen as a structural vulnerability. As global growth slows and protectionist measures rise, the ability of foreign markets to absorb Chinese goods may diminish.
Recent trade data reflects this emerging trend. China reported that exports grew 2.5% in March compared with a year earlier, a notable slowdown from the stronger gains recorded in the preceding months. Some analysts attributed part of the decline to seasonal factors, but the broader trajectory points to moderating demand.
Experts warn that a prolonged period of elevated energy prices and geopolitical instability could further constrain global economic activity, reducing demand for imports worldwide. In such an environment, export-driven economies like China may face increasing pressure.
At the same time, domestic policy responses could shape the outlook. Economists suggest that increased government spending and infrastructure investment could help sustain headline growth in the short term. However, without a corresponding recovery in household consumption, such measures risk deepening underlying imbalances.
Weak consumer demand, combined with excess industrial capacity, could intensify deflationary pressures, complicating efforts to achieve sustainable, balanced growth. Over time, this dynamic may reinforce China’s dependence on exports, even as external conditions become less favorable.
For now, the first-quarter data offers reassurance that China’s economy remains on stable footing. But with global uncertainties mounting and internal challenges unresolved, the durability of that momentum will likely be tested in the months ahead.
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