SHANGHAI: China’s growth likely rebounded in the first quarter of 2026, offering policymakers time to assess the impact of the Iran war on the world’s second-largest economy before stepping in with stimulus.
Gross domestic product (GDP) is expected to have expanded 4.8% from a year ago, according to the median forecast of economists polled by Bloomberg ahead of the official release today.
That would be an acceleration from the 4.5% gain recorded in the final quarter of 2025, which was the weakest reading since the country reopened after Covid in late 2022.
The US-Israel war against Iran probably only had a limited impact on activities so far, thanks in part to China’s moves in past years to strengthen energy security and insulate its economy from global ructions.
Years of deflationary pressure have also blunted the potential for an immediate impact on consumer prices from higher oil costs.
But as imports of high-tech products jumped in March, driven in part by an investment boom in artificial intelligence (AI), the goods trade surplus shrank almost 5% in the first quarter from a year ago in yuan terms.
Although that could mean less support from net exports, strong global demand linked to AI is helping ward off external threats to Chinese companies at a time when the conflict in the Middle East is wreaking havoc on the world economy.
A solid report would reduce the urgency for additional stimulus, especially after Beijing adopted a more flexible approach toward growth by lowering its GDP goal to a range of 4.5% to 5%, the lowest since 1991.
A rising number of economists is forecasting the People’s Bank of China won’t cut interest rates this year, because the oil shock pushed up inflation expectations.
“We expect policymakers to adopt a wait-and-see mode for now,” Macquarie Group Ltd economists led by Larry Hu said in a report last Friday.
“China’s stimulus calculus will depend on the trajectory of the US economy and the ongoing AI boom. Both remain major tailwinds to exports, the key engine of China’s economy.”
Other figures today are likely to show that imbalances between the supply and demand sides of the economy persisted.
Industrial output is forecast to grow 5.3% in March from a year ago. Even though that would be a step down from the 6.3% rise seen in the January and February period, it would likely be seen as a strong result, given that factories had more days off compared with 2025 due to a later-than-usual Lunar New Year holiday.
That strength is partly a result of a 15% surge in exports in the first quarter from a year ago.
A boom in AI investment is driving overseas sales of high-tech items such as chips, while Chinese green products like electric vehicles continue to grab more market share abroad. — Bloomberg
