China’s economic expansion in the first quarter hit a 5% year-over-year pace, according to data the government released Thursday, and the report suggested the early impact from the Iran war had been limited. The figures cover January through March, a period that included the war’s start, and they showed growth stronger than economists had expected.
The first-quarter reading also marked an acceleration from the prior quarter: the government’s estimate rose to 5% from 4.5% in October through December. On a quarter-on-quarter basis, China’s economy grew 1.3% in the first three months from the final quarter of last year, described in the report as the fastest pace in a year.
Economists said the result indicated China could weather short-term disruption from the Iran war, which has been pushing energy prices higher and contributing to inflation pressures while also affecting global economic growth. They pointed to the idea that any hit from the conflict might show up more clearly later, depending on how long higher energy costs and weaker international demand continue.
The International Monetary Fund trimmed its outlook this week for China, forecasting 4.4% growth for 2026, citing reduced global growth forecasts tied to the Iran-war shock. Chinese leaders last month set a growth target for the year of 4.5% to 5%, the slowest target range reported as far back as 1991, setting a benchmark that the first-quarter data would need to sustain to reach.
In a comment cited alongside the release, Lynn Song, chief economist for Greater China at ING, said 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.” The warning focused on the possibility that higher energy costs could persist and compound the effect on overall economic activity beyond the immediate shock.
Thursday’s broader snapshot also included industrial and consumer indicators. Government data showed industrial output rose 5.7% in March from a year earlier, beating market expectations, and the report linked the strength to continued global demand for Chinese electronics, autos, semiconductors and robotics. Retail sales, by contrast, grew 1.7% year over year, worse than estimates and slower than 2.8% growth in January and February, reflecting sluggish domestic demand for consumer goods.
The figures arrived amid ongoing pressure in China’s real estate sector, which has been in slump for years and has weighed on consumer and investor confidence. Despite those headwinds, the report said China met its targeted “around 5%” growth last year, supported by robust exports that helped drive the trade surplus to a record nearly $1.2 trillion, even as U.S. President Donald Trump’s higher tariffs have been adding pressure to trade.
Economists said export performance would remain important for China’s growth this year, but they warned that reliance on export demand could become a vulnerability if the Iran war lasts longer. Eswar Prasad, a professor of economics and trade policy at Cornell University, said the “lack of a speedy resolution to the Iran war is likely to dent global growth, which will negatively impact other economies’ ability to absorb Chinese exports,” and added that the appetite for imports was shrinking as countries try to protect their own firms, households and economies from the conflict.
Prasad also argued that public investment could provide a near-term boost to overall growth but might not fix weaker consumer demand. He said a boost in public sector investment would stabilize headline growth, but “unless household demand strengthens significantly,” it could intensify underlying deflationary pressures and leave the economy more dependent on exports as the year progresses.