China's Economic Momentum Faces Mid-Year Slowdown Amid Middle East Tensions

China's economy showed early growth in 2026, largely due to strong exports but faces a slowdown due to the Middle East crisis affecting profits and demand. Although GDP increased in the first quarter, it is expected to decline overall by the end of the year, according to a Reuters poll.

China's economy displayed early resilience in 2026 by leveraging solid export numbers to ignite growth in the first quarter. Yet, economists anticipate this momentum will wane as geopolitical tensions in the Middle East impact corporate profits and global demand, according to a Reuters poll.

The country's GDP surged to 4.8% in the first quarter, improving from 4.5% in the final quarter of the previous year. Nonetheless, growth is projected to dip to 4.7% in the second quarter, resulting in a yearly expansion of only 4.6% in 2026. This represents a downturn from 2025's 5.0%, albeit still within the government’s target range.

While China's diversified energy portfolio and robust oil reserves have mitigated disruption from the Iran conflict, higher oil prices are already dampening input costs and reducing profit margins. Export growth, a cornerstone of China’s economy, could suffer further if the Middle East tensions persist, analysts warn.