Economy grows at 5% in first quarter, shrugging off initial impact of Iran war 

Foreign visitors try out the AI-powered glasses by iFLYTEK at the Canton Fair, in Guangzhou,
in southern China’s Guangdong province, last week [AP Photo]

China’s economy accelerated in the first quarter of this year, expanding 5% from a year earlier as it largely shrugged off impacts from the Iran war so far, according to data released late last week.

The January-March data released by the government, covering a period during which the Iran war began, was better than what economists expected and was up from the 4.5% growth seen in the October-December quarter.

On a quarter-on-quarter basis, China’s economy grew 1.3% in the first three months from the final quarter of last year, the fastest pace in a year.

Economists expect China, the world’s second largest economy, to be able to weather short-term impacts from the Iran war, now in its seventh week. The war is pushing energy prices higher, worsening inflation and impacting global economic growth. But longer term, areas including global demand for Chinese exports could take a hit.

The International Monetary Fund this week trimmed its economic growth estimates for China to a 4.4% expansion for 2026 as it lowered its global growth forecasts over Iran war shocks. Chinese leaders last month set an economic growth target of 4.5% to 5% for this year, the slowest since 1991.

“China can likely weather short term disruptions, but a protracted war and higher for longer energy prices would likely start to bite into growth by the second half of the year,” said Lynn Song, chief economist for Greater China at Dutch bank ING.

Also on Thursday, government data showed industrial output in China rose 5.7% in March year-on-year, better than market expectations, as global demand for Chinese exports of electronic equipments, autos, semiconductors and robotics remained strong.

Retail sales were up 1.7% from a year earlier, worse-than-estimates and slower than the 2.8% growth in January and February, reflecting sluggish domestic demand for consumer goods.

A years-long real estate sector slump in China has dragged consumer and investor confidence, but the country managed to achieve its targeted “around 5%” growth last year, powered by robust exports that drove its trade surplus to a record nearly $1.2 trillion despite U.S. President Donald Trump’s higher tariffs. CHAN HO-HIM, HONG KONG, MDT/AP