China's economy grew faster than expected in the first three months of the year, even as countries around the world feel the impacts of the US-Israel war with Iran.
Gross domestic product (GDP) rose by 5% in the period, compared to a year earlier, according to official data. Economists had expected the figure to come in at around 4.8%.
This growth occurred despite the ongoing conflict in the Middle East, which began on February 28, severely disrupting global energy supplies, particularly affecting Asian countries.
The latest figures mark the first official GDP release since Beijing cut its annual economic growth target last month to a range of 4.5% to 5%, which is its lowest expansion goal since 1991.
The rebound from a weaker expansion of 4.5% in the previous quarter was mainly driven by the manufacturing sector, although the country is still hindered by a decline in property investment.
Analyst Kyle Chan from the Brookings Institution noted that cars and other exports were a “major bright spot” in the latest data.
Chan cautioned that the full effects of the Iran war on China’s economy are yet to be seen, suggesting that the next quarter's GDP figure might be weaker due to potential trade disruptions stemming from the conflict.
China's latest GDP target and economic objectives were announced in March within its latest Five Year Plan. Beijing has pledged to invest significantly in innovation, high-tech industries, and efforts aimed at boosting domestic spending.
The ruling Communist Party is attempting to reshape the nation's economy amid various challenges, including weak consumer demand, a shrinking population, and a prolonged property crisis.
Furthermore, China faces an energy squeeze due to the war in Iran and ongoing global trade tensions, particularly influenced by US tariff policies.
China currently faces a 10% US tariff on most of its goods. Yet, US Treasury Secretary Scott Bessent mentioned on Tuesday that these levies could be restored by July to levels that existed before the Supreme Court overturned several import taxes.
Import figures from March revealed a sharp slowdown in growth, attributed in part to rising inflation and decreased consumer spending instigated by the conflict. After a remarkable increase in exports in January and February, the March growth rate sharply fell to 2.5%, marking a six-month low.
Import surges were recorded, showing nearly a 28% increase in March alone, resulting in a trade surplus of just over $50 billion, the lowest in more than a year. This increase in import value is likely a consequence of rising global costs due to the Iran war.
Iran's threats against vessels in the vital Strait of Hormuz shipping route have escalated crude oil prices and the costs of petrochemical products.
While China is less dependent on Gulf oil compared to other major Asian economies such as Japan and South Korea, rising fuel prices are becoming a concern domestically, prompting some Chinese airlines to cut flights due to soaring jet fuel costs.
The conflict in Iran may further affect China's exports if worldwide consumer spending wanes due to price hikes caused by the ongoing war.
Ultimately, Zhou stated, Export growth fundamentally depends on the economies of trading partners. Maintaining high rates of growth continuously proves challenging.
