China Records 5% Economic Growth in First Quarter Amid Ongoing Iran Conflict Fallout

China's Economy Surges 5% in Q1, Exceeding Expectations

China's economy grew by 5% in the first quarter of this year, exceeding expectations despite the global fallout from the US-Israel war. The first three months of GDP generated 33.4 trillion yuan (approximately USD 4.87 trillion), accelerating by 0.5 percentage points from the fourth quarter of 2025, according to data from China's National Bureau of Statistics (NBS) released on Thursday.

This strong opening marks the beginning of China's 15th Five-Year Plan period, which aims to reshape the country's economy, which has been struggling with several issues, including weak consumption, a shrinking population, and a prolonged property crisis. The NBS said that the plan aims to address these challenges and promote sustainable economic growth.

Property investment, a heavy drag on economic growth last year, fell 11.2% in the first three months of the year, worsening slightly after a fall of 11.1% was reported in January and February. However, the growth of production and supply accelerated, market demand continued to improve, employment was generally stable, market prices picked up moderately, and high-quality development advanced with new and positive momentum, according to the NBS.

In a bid to address the economic challenges, China lowered its GDP target to 4.5-5% for this year last month. The International Monetary Fund (IMF) has also lowered China's 2026 growth forecast to 4.4% from 4.5% in January, citing weak demand and fallout from the Iran war.

| Growth Rate Comparison | Q1 2026 | Q4 2025 | | --- | --- | --- | | GDP Growth Rate | 5% | 4.5% | | Property Investment | -11.2% | -11.1% | | Retail Sales Growth Rate | 0.7% | - | | Fixed-Asset Investment Growth Rate | 1.7% | - |

The IMF's downgrade is a reflection of the global economic uncertainty, which is likely to impact China's economy in the second quarter. However, policymakers are unlikely to take immediate action, according to Ding Shuang, the chief economist for Greater China and North Asia at Standard Chartered.

The data released by the NBS reflect a marked improvement across both supply and demand. On the supply side, agricultural production remained favorable, while industrial output grew at a faster pace compared with the fourth quarter last year, with sustained rapid growth in the service sector. On the demand side, the growth rate of retail sales of consumer goods quickened by 0.7 percentage points compared to the last three months of 2025.

Foreign trade in goods registered the fastest quarterly growth rate in five years, while fixed-asset investment swung back to growth, rising 1.7%. Over the 14th Five-Year Plan period (2021-2025), China saw its economy grow at an average annual rate of 5.4%, well above the global average, and accounted for around 30% of global growth.

However, the NBS cautioned that the external environment is becoming more complex and volatile, and the imbalance between strong supply and weak demand is still acute. China's economy is expected to continue to face challenges in the coming quarters, but the country's sustained efforts to diversify its energy mix have helped it remain largely unaffected by the global energy price shocks.