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China's economy expands 5% in first quarter
China's gross domestic product (GDP) grew by 5% year-on-year in the first three months of 2026, surpassing economists' expectations of 4.8%, official data revealed on Tuesday.
Middle East conflict fails to derail recovery
The growth occurred despite severe disruptions to global energy supplies triggered by the US-Israel war with Iran, which erupted on 28 February. Asian economies, including China, have faced heightened pressure from the crisis.
This quarter's figures represent the first official GDP release since Beijing adjusted its annual growth target last month to a range of 4.5%-5%, the lowest expansion goal since 1991.
Manufacturing and exports drive rebound
The economy rebounded from a 4.5% expansion in the previous quarter, with manufacturing playing a key role. However, falling property investment continues to weigh on overall performance.
"Cars and other exports were a major bright spot in the data,"
Kyle Chan, Brookings Institution analyst
Chan warned that the full impact of the Iran conflict remains uncertain, predicting weaker GDP growth in the next quarter due to trade disruptions.
Trade slowdown and rising costs
China's export growth slowed sharply to 2.5% in March, down from a combined 20% surge in January and February, according to customs data. The earlier boost was driven by strong demand for electronics and manufactured goods.
Imports surged nearly 28% in March, reducing China's trade surplus to just over $50 billion (£36.85 billion), the lowest in over a year. Economists attribute the rise in import costs to global inflation fueled by the Iran conflict.
"Export growth ultimately depends on your trading partners' economies. It is hard to sustain that growth at a very high rate continuously."
Yixiao Zhou, Australian National University
Energy prices and trade tensions add pressure
Iran's threats to block the Strait of Hormuz have driven up crude oil prices, affecting plastics and other petroleum-based materials. While China is less reliant on Gulf oil than Japan or South Korea, domestic fuel costs are rising, and some airlines have reduced flights due to soaring jet fuel prices.
China also faces ongoing trade tensions, including a 10% US tariff on most goods. US Treasury Secretary Scott Bessent indicated on Tuesday that these levies could return to pre-Supreme Court levels by early July.
Presidents Xi Jinping and Donald Trump are scheduled to meet in China next month, though the outcome remains uncertain.
Government targets innovation and domestic demand
Under its latest Five-Year Plan, Beijing has pledged heavy investment in innovation, high-tech industries, and efforts to boost domestic consumption. The Communist Party aims to reshape an economy grappling with weak consumer spending, a shrinking population, and a prolonged property crisis.
