Economic activity in China is expected to have gathered some pace in the first quarter, driven in part by resilient export performance, according to a poll of 50 economists. The median forecast from the survey puts year-on-year gross domestic product growth for January-March at 4.8%, up from a three-year low of 4.5% in the October-December quarter.
Despite the projected Q1 acceleration, respondents anticipate a gradual slowdown through the remainder of 2026. The poll’s median outcome projects growth of 4.7% in the second quarter and an overall expansion of 4.6% for the full year, down from last year’s 5.0% but still broadly inside the official 2026 target range of 4.5% to 5.0%.
Economists cited the ongoing conflict in the Middle East as a significant downside risk to the outlook. So far, China has absorbed the shock with relatively limited disruption, helped by large reserves of oil, a varied energy mix and strict price controls. Nonetheless, sustained higher crude prices are beginning to feed into domestic costs, lifting factory-gate prices and compressing corporate margins at a time when household demand remains subdued.
Analysts at Morgan Stanley noted that rising oil costs hit China through a terms-of-trade shock and through squeezes on downstream margins. They added that China’s energy position leaves it better placed than many other net oil importers that face narrower policy room amid inflation pressures. Even so, signs of strain are emerging: factory-gate prices rose in March for the first time in more than three years, an early indicator that energy-related cost pressures are being passed through into the economy and weighing on already-thin corporate profit margins.
External demand poses a parallel concern. China’s export engine, a central pillar of growth, could weaken if the conflict drags on and dampens the global economic backdrop. Data scheduled for release later this week are expected to show export growth cooled in March as international buyers contend with the economic consequences of the conflict.
On a quarterly basis, poll respondents project 1.3% expansion in January-March, a small improvement from the 1.2% quarter-on-quarter rise recorded in October-December. The government plans to publish first-quarter GDP and March activity figures at 0200 GMT on April 16.
Policy settings look set to be cautiously supportive rather than aggressively stimulative. Beijing has provisioned a budget deficit of roughly 4% of GDP for 2026 and has arranged substantial bond issuance to underpin growth. The central bank has pledged to maintain accommodative policy, but its capacity to lower interest rates is constrained by a gradual uptick in inflationary pressures.
Societe Generale strategists argued that a solid first-quarter GDP reading would likely allow policymakers to postpone major stimulus moves at the Politburo meeting later this month, even in the face of energy-related risks from the Middle East. The Politburo is expected to convene to review the economic outlook and determine the policy approach for the months ahead.
Officials have acknowledged an "acute" imbalance in the economy between robust supply and weak demand, and have pledged to significantly raise the share of household consumption in the economy over the next five years, although they have not provided a specific numerical target for that shift.
Among market and monetary policy expectations reflected in the poll, respondents largely anticipate the central bank will keep the benchmark one-year loan prime rate unchanged through the end of 2026. They also expect a modest liquidity measure in the form of a 20 basis-point cut to banks’ weighted-average reserve requirement ratio in the third quarter.
Inflation is projected to pick up from negligible growth in 2025 to 1.0% in 2026 before stabilizing in 2027, according to the poll’s median forecast. That modest rise in consumer prices is one factor limiting the central bank’s scope for aggressive easing.
In sum, the poll underscores a near-term rebound in China’s economy driven by exports and a modest recovery in quarterly activity, but it also highlights clear downside risks tied to energy price pressures and potential deterioration in external demand if the Middle East crisis persists. Policymakers appear ready to provide measured fiscal and liquidity support while avoiding large-scale stimulus unless growth softens more sharply than currently anticipated.