China's Q1 2026 GDP Growth Beats Forecasts at 5% Despite Iran War Impact
China's economy showed remarkable resilience in the first quarter of 2026, with GDP growing 5% year-on-year despite global energy shocks from the Iran war. This beat economist forecasts of 4.8% growth and accelerated from the 4.5% growth in Q4 2025.
Stronger Than Expected Performance
China's National Bureau of Statistics reported a 5.0% increase in GDP from the same period last year on Thursday, marking an acceleration from the 4.5% growth reported in the final quarter of last year. This beat the consensus forecast of 4.8% growth.
Manufacturing Leads Recovery
Industrial production jumped 6.1% year-on-year for the first quarter, outpacing retail sales' quarterly growth of 2.4%. The economy was powered by strong manufacturing and exports. In the first quarter, China's exports grew 14.7% from a year earlier in U.S. dollar terms, the fastest pace since early 2022.
Iran War Impact Emerging
While impressive with a 21.8% year-on-year surge in exports in the first two months, that figure plunged to 2.5% in March as the war, which broke out on the last day of February, slowed shipments and increased logistical costs. China's factory-gate prices turned positive last month for the first time in more than three years as soaring commodity prices, particularly oil, began to weigh on China's vast industrial powerhouse.
Policy Implications
Beijing had lowered its growth target this year to a range of 4.5% to 5%, the least ambitious goal on record going back to the early 1990s. Resilient overall growth at the start of 2026 has reduced the need for policymakers to double down on fiscal stimulus or monetary easing.