China's Q1 GDP Grows 5%, Beating Forecasts Amid Iran War Risks to Global Demand

Gate News message, April 16 — China's economy expanded 5% in the first quarter of 2026 compared to a year earlier, according to National Bureau of Statistics data released on April 16, beating analyst expectations of 4.8% growth and rebounding from a three-year low of 4.5% in Q4 2025. The rebound was driven by strong exports and policy support, though cooling retail sales signal ongoing domestic consumption challenges.

Industrial output rose 5.7% in March year-on-year, slowing from 6.3% in January-February. Retail sales grew only 1.7% in March, down from 2.8% in the prior two-month period and below the 2.3% forecast. Exports grew 2.5% in March year-on-year, a sharp deceleration from 21.8% in January-February; however, for the January-March period, exports rose 14.7% year-on-year, well above 2025's full-year growth of 5.5%.

The Iran war has exposed China's vulnerability as the world's largest energy importer and export-reliant economy. Rising energy and transportation costs are cooling global demand and lifting factory-gate prices; China's factory prices rose in March for the first time in over three years, signaling cost pressures seeping into corporate margins. Quarterly expansion stood at 1.3% for January-March versus 1.2% in October-December.

Policy support remains in focus: fiscal expenditure rose 3.6% in January-February, up from 1% in 2025, with Beijing setting a 4% budget deficit target for 2026 and pledging heavy bond issuance. The central bank has committed to keeping policy accommodative despite limited room for rate cuts as inflation edges higher. Policymakers have acknowledged an "acute" imbalance between strong supply and weak domestic demand, vowing to significantly lift household consumption's share of GDP over the next five years.