China's Economic Resilience in the Face of Middle East Conflict

China's economy appears to have gained momentum at the start of 2026, thanks to robust exports and supportive government policies. However, this streak faces challenges due to the impact of the ongoing Middle East conflicts, notably pushing energy costs higher. This increase, coupled with declining global demand, is straining corporate margins and creating a less optimistic outlook for the remainder of the year.

GDP figures anticipated on Thursday are expected to indicate a growth of 4.8% in the first quarter compared to the same period last year, up from the 4.5% recorded at the end of 2025. Looking ahead, GDP growth is predicted to slow in the next quarter to 4.7%, thereby reducing the annual growth forecast to 4.6% from last year's 5.0%, in line with official targets.

Key economic analysts, including Xinquan Chen from Goldman Sachs, highlight that while exports continue to be crucial for China's growth, the recent energy shock raises concerns about the sustainability of external demand. Specific trading partners, especially lower-income emerging markets, are displaying increased exposure to stagflation risks. The slowing export growth, coupled with inflationary pressures indicated by a rise in factory-gate prices, further complicates the economic landscape.