China's economic growth eases concerns over global growth amid Middle East conflict

China’s economic indicators showing improvements eased some concerns over global economic growth due to the Middle East conflict triggered by the US and Israel’s joint war against Iran.

While global markets enjoy some positive improvements as the conflict in the Middle East increasingly shifts away from warfare to negotiations, incoming macroeconomic data and corporate finances continue to reveal the impact of the conflict.

The observable decline in oil prices and accelerating negotiations between the US-Israeli and Iranian sides alleviated some concerns over economic growth, while the Chinese economy's posting above-estimate growth for the first quarter of the year contributed to easing concerns.

China’s gross domestic product (GDP) surged 5% year-on-year in January–March despite the negative impact of the Middle East war, aligning with Beijing’s target of 4.5–5% for this year, while the country’s economy grew 1.3% in the first quarter of this year versus the previous quarter, according to the National Bureau of Statistics (NBS).⁠

Last year, the Chinese economy grew 4.5% on an annual basis in the fourth quarter and 5% throughout the year. The loss of momentum in growth prompted Beijing to revise its annual growth target from the previously set 5% level to the 4.5–5% level.

The International Monetary Fund (IMF)⁠ lowered its growth forecast for China within the emerging and developing economies group from 4.5% to 4.4% for 2026, maintaining 4% for 2027.

Sadi Kaymaz, an Asia markets analyst, told Anadolu that first-quarter economic performances typically stand out amid advance purchases, and second-quarter growth figures are also generally strong.

“But issues could still come to the fore in the second quarter, so one shouldn’t get too carried away by expectations,” he warned.

Kaymaz stated that China’s supply remains strong while demand stays weak.

“Industrial production grew 5.7% in March, some 0.4 percentage points above estimates, while the first-quarter rate was a 6.1% growth,” he said. “On the export side, high-tech growth surged 15% on an annual basis, but on the retail side, sales in March climbed 1.7% year-on-year, below the 2.4% expectation.

“Car sales fell around 8% on an annual basis in the first quarter, as the subsidy for trading in old vehicles has been discontinued at the start of the year, particularly impacting the budget car segment; meanwhile, construction materials and furniture markets are still struggling as they are both reliant on the housing market,” he added.

He noted that the unemployment figure in China also came in above estimates and that the real estate sector has not been encouraging, as new home prices fell 0.21% month-on-month and existing home prices 0.24% in March, showing that second-home purchases began to pick up in some major cities.

Arjen van Dijkhuizen, senior economist at ABN AMRO, said the moderate acceleration in China’s real GDP growth has been within estimates, with rising exports in February and fixed investments returning to growth.

He added that returning investments likely offset the impact of the Middle East war at the end of the first quarter, but imbalances still persist, especially if supply remains larger than demand.

*Writing by Emir Yildirim