Analysts doubt Iran war will prompt China stimulus, tip ‘solid’ first-quarter GDP growth

Analysts doubt Iran war will prompt China stimulus, tip ‘solid’ first-quarter GDP growthFlexible growth target means little likelihood of imminent stimulus, but focus will switch to impact of disruptions in second quarter3-MIN READ3-MIN0ListenPublished: 9:00pm, 15 Apr 2026The US-Israeli war on Iran and the current Iranian and American blockades of shipping through the Strait of Hormuz are likely to overshadow China’s first-quarter economic performance, analysts said, with questions looming large about how the world’s second-largest economy will handle their impact.Many observers said they expect the leadership in Beijing will adopt a wait-and-see approach, with little likelihood of an immediate stimulus to guarantee the country’s annual economic target is met.“The first-quarter performance should be solid,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered, predicting gross domestic product growth of around 4.8 per cent on the back of resilient trade and gradually improving consumption.He said that forecast was set against a relatively high base last year, and “if realised, it would meet or even exceed Beijing’s expectations”.His forecast is in line with the average of economists’ forecasts compiled by financial data provider Wind.The National Bureau of Statistics is due to release first-quarter GDP figures on Thursday, offering an early indication of how successful the Chinese economy has been in weathering several months of geopolitical tensions, particularly in the wake of the war.Ding said the Middle East conflict was likely to have a greater impact on the Chinese economy in the second quarter of the year, when policymakers would closely monitor risks and adjust policies as needed. However, China had fared better than other countries in absorbing the shock, thanks to its diversified energy supply system, which had helped cushion the impact of the conflict on economic activity.02:16Chinese premier sets 2026 GDP growth target at 4.5-5%Chinese premier sets 2026 GDP growth target at 4.5-5%The flexible GDP target adopted at the annual meeting of the national legislature last month had also left policymakers with ample room to manoeuvre, Ding said, adding this meant there was little need to adjust policy at this stage.“For now, there is no need for additional stimulus based on first-quarter data,” he said. “There is unlikely to be any major policy response at this month’s Politburo meeting. Any additional measures would probably depend on second-quarter data, with action more likely around July.”China set a GDP growth target of 4.5 per cent to 5 per cent for this year, following last year’s 5 per cent expansion, as external risks and prolonged deflationary pressures at home weigh on the economic outlook.The Iran war has driven up global energy and commodity prices, with shipping through the Strait of Hormuz – a key artery for global trade – severely disrupted.Further ReadingXu Tianchen, senior economist at the Economist Intelligence Unit, forecast first-quarter growth of 4.9 per cent, largely driven by robust trade growth.“China, alongside other East Asian economies, has coped well with the conflict due to its ample oil reserves,” Xu said, adding that the country had performed better than many in Southeast and South Asia.“We see little need for extra stimulus as policymakers should be satisfied with the growth performance so far,” he said. “They will prefer leaving some room for the rest of 2026.”If geopolitical risks intensify or external shocks exceed expectations, further policy support may be neededGuangzhou-based Yuekai Securities forecast first-quarter GDP growth of around 5 per cent, citing the early impact of policy support, the launch of major local projects and robust activity during the extended Chinese New Year holiday.But it said in a report that it expected growth to ease to around 4.8 per cent in the second quarter, partly due to disruptions linked to Middle East tensions and a fading holiday effect, with consumption increasingly dependent on income expectations and household confidence.“If geopolitical risks intensify or external shocks exceed expectations, further policy support may be needed, including measures to boost consumption, step up infrastructure investment and provide targeted support to affected sectors and regions,” the report said.In its new five-year plan, Beijing has pledged to increase investment in innovation, hi-tech industries and research, while aiming to “notably” raise the share of household consumption in the economy.To support that ambition, authorities have rolled out a series of policy measures, including setting the budget deficit ratio at around 4 per cent of GDP – retaining last year’s record high figure.Policymakers have also signalled a broader shift in growth drivers from exports towards domestic consumption, pledging to support employment, raise household incomes, expand trade-in programmes for consumer goods and boost services consumption.