In the first quarter of this year, China's exports in US dollars grew by 14.7% compared to the previous year, the fastest growth rate since the beginning of 2022, according to data from the Economist Intelligence Unit. Meanwhile, investment in the real estate sector fell by 11.2%. In March, retail sales in China grew by 1.7% compared to the previous year, down from a 2.8% increase in February, driven by the holiday season, and below economists' expectations of 2.3%. Industrial production last month grew by 5.7% compared to the previous year, exceeding analysts' forecasts of 5.5%, compared to 6.3% recorded in February. In the first quarter, industrial production jumped by 6.1% year-on-year, outpacing the quarterly growth in retail sales of 2.4%, confirming the continued dominance of the manufacturing sector as the main driver of economic growth, even with slowing consumption. Tianchen Shu, chief economist at the Economist Intelligence Unit (EIU), said that the strong growth seen at the beginning of 2026 reduced the need for policymakers to double financial stimulus or monetary easing, as the policy focus shifted towards supporting private consumption and investment. However, this growth stalled amid the conflict in the Middle East. As the world's largest oil importer and an economy heavily reliant on exports, China is exposed to the risk of an oil shock that is already slowing trade, raising factory costs, and casting a shadow on the outlook for the rest of the year. In March, the country's export growth slowed to 2.5%, a sharp drop from the 21.8% recorded in January-February, as the Iranian war led to higher energy and logistics costs, negatively impacting global demand. Prices for products from Chinese factories rose in March for the first time in over three years, indicating that rising energy costs are starting to affect the manufacturing sector and threaten the already slim profit margins of companies. The Chinese economy showed a notable recovery in the first quarter, where strong export growth compensated for weak domestic demand, although the energy shock from the Iranian war is casting a shadow on growth prospects, threatening global demand. Data released by the National Bureau of Statistics on Thursday showed that Gross Domestic Product (GDP) grew by 5% in the three months ending in March, accelerating from 4.5% in the previous quarter and exceeding economists' forecasts of 4.8% according to a Reuters survey. Beijing had lowered its growth target for this year to a range of 4.5% to 5%, the least ambitious target since the early 1990s, in an implicit acknowledgment of slowing demand and ongoing trade tensions with the United States. The National Bureau of Statistics said in a statement: "We must realize that the external environment is becoming more complex and volatile," warning of a sharp imbalance between "strong supply and weak demand." Separately, investment in urban fixed assets, including investment in real estate and infrastructure, grew by 1.7% in the first quarter compared to the previous year, exceeding a Reuters survey forecast that pointed to a 1.9% increase.
