China’s main economic indicators fared better than forecast to start the year, in a sign that momentum was improving before the war in Iran roiled the outlook for global growth and inflation.
Industrial production climbed 6.3% in the January-February period from a year ago — its fastest growth since September and up from 5.2% in December. Fixed-asset investment unexpectedly expanded 1.8%, according to data released by the National Bureau of Statistics on Monday, after contracting for the first time on record in 2025.
Retail sales rose 2.8% in the first two months, accelerating from 0.9% in December and topping the 2.5% median forecast of economists surveyed by Bloomberg.
The figures provide the first official snapshot of the state of the world’s second-biggest economy this year. China usually publishes combined data for January and February to smooth out distortions caused by the irregular timing of the Lunar New Year holiday.
But in the past two weeks, the widening conflict in the Middle East has upended energy markets and caused a new disruption to trade. While China is less vulnerable to an oil price shock than other major economies in Asia, its export machine is exposed to the threats to global growth and inflation.
Beijing lowered its annual economic growth target to 4.5%-5% — the least ambitious goal since 1991, though from a much larger base of gross domestic product. While exports were surprisingly strong in the first two months of 2026, the outlook now hinges in part on the duration and intensity of the war, which began with US and Israeli strikes against Iran on Feb. 28.
What Bloomberg Economics Says…
“The market is taking a sharp dive as the Iran war intensifies. If the conflict drags on, the market turmoil could spill into the real economy. For China, the main risk isn’t inflation. It’s the secondary shock — a sharp downturn in global demand for exports. That could add to the challenge of achieving the government’s growth target.”
— David Qu, Eric Zhu and Chang Shu. To read the full note, click here.
So far, authorities have adopted a cautious approach, choosing to observe how the situation unfolds instead of rushing out new policies. Earlier this month, the government unveiled a slightly scaled back fiscal stimulus plan for this year.
Chinese leaders are known for delivering economic goals they set for themselves, but how they achieve the more modest target this year will be key. The country’s growing reliance on exports to drive growth is fueling tensions with trading partners and failing to benefit households.