China’s economy grew 5% year-on-year in the first quarter, beating market expectations despite the global impact of the U.S.-Israel war in Iran, which analysts said indicates the country remains on track to meet its full-year growth target without the need for near-term stimulus. The closely watched gross domestic product (GDP) growth figure, released by the National Bureau of Statistics (NBS) last week, beat the 4.86% forecast by economists polled by financial data provider Wind. It also marked an acceleration from the 4.5% recorded in the last three months of 2025, which was China’s weakest quarterly growth figure in three years. “GDP came in stronger than expected, marking a very solid start to the year, and Beijing is unlikely to take immediate policy action,” said Ding Shuang, Chief Economist for Greater China and North Asia at Standard Chartered. Ding said that while external uncertainties are rising and could weigh more heavily on the second quarter, policymakers are likely to emphasize flexibility and retain policy space rather than act immediately. On monetary policy, he added that there is little need for an interest-rate cut in the near term, although authorities may lower the reserve requirement ratio (RRR) to maintain ample liquidity.
The Chinese government has set this year’s growth target at 4.5% to 5%, a slight shift from the goal of “around 5%” that had been the recent norm, as the economy grapples with weak domestic demand, a prolonged property downturn and rising external risks. “China won’t have any problem hitting the 4.5% to 5% growth target. It also means there’s little to no need for fiscal stimulus or monetary easing,” said Xu Tianchen, Senior Economist at the Economist Intelligence Unit (EIU). Policy will instead shift towards boosting consumption and reviving investment, with growth still tilted towards exports, Xu said. Retail sales rose by 1.7% year-on-year in March, the NBS said, beating the Wind poll’s forecast of 1.6%. In the first two months of the year, when data is typically combined to minimize distortions from the Chinese New Year holiday, they rose 2.8%. Meanwhile, the country’s industrial output grew by 5.7% year-on-year last month, following a 6.3% rise in January and February. Property investment, a heavy drag on economic growth last year, fell 11.2% in the first three months of the year, worsening slightly after a fall of 11.1% was reported in January and February. “For property, there’s more good news than bad news. Stabilizing prices and robust transaction volumes signal market improvements,” Xu said.
Gary Ng, Senior Economist at Natixis Corporate and Investment Bank, said the data pointed to “a limited impact from the Iran war for now”, though underlying pressures are building. “Pressure on retail sales, investment and overcapacity is increasingly apparent as growth decelerates and industrial utilization rates decline,” he said, adding that solid headline growth reduces the urgency for broad stimulus, with policymakers likely to rely on targeted support instead, the South China Morning Post reports.
The International Monetary Fund (IMF) projected China’s economy to expand by 4.4% in 2026, well above the global average of 3.1% and the 3.9% forecast for emerging markets and developing economies. China’s 2027 growth is projected at 4.0%, reflecting a gradual moderation as the economy shifts toward higher-quality development.
