China Faces Growth Moderation as Middle East Instability Pressures First Quarter Economic Data

ING analysts predict a moderation in China's GDP and retail sales as Middle East conflict headwinds and property sector weakness pressure the economy.

By: AXL Media

Published: Apr 16, 2026, 5:57 AM EDT

Source: Information for this report was sourced from ING

Anticipated Cooling of First Quarter Economic Momentum

The Chinese economy is approaching a critical data juncture as the government prepares to release figures for GDP, trade, and industrial production amid a shifting global landscape. According to Lynn Song, Chief Economist at ING, the first quarter growth is expected to moderate to 4.7 percent year on year, a notable step down from the 5.0 percent recorded in the final quarter of the previous year. This deceleration reflects a broader cooling of the post-reopening momentum as the initial surge in activity begins to stabilize against more challenging year on year comparisons. Investors are closely watching these figures to gauge whether Beijing’s recent support measures are sufficient to prevent a deeper slide.

Trade Surplus Projections Amid Export Deceleration

Trade data scheduled for release on Tuesday is expected to show a moderation in the exceptionally strong export growth witnessed during the first two months of the year. Analysts project that March exports will rise by 8.8 percent year on year, while imports are anticipated to grow by 10.1 percent. This rebalancing is expected to result in a trade surplus of approximately $108.2 billion. While these figures remain historically robust, the narrowing gap between export and import growth suggests that domestic demand for raw materials is rising even as the global appetite for Chinese manufactured goods begins to face new logistical and geopolitical constraints.

Retail Sales Slump Highlights Persistent Consumer Caution

Domestic consumption remains the most significant drag on the Chinese recovery, with retail sales projected to slow to a meager 2.5 percent growth rate for the month of March. This soft performance underscores a deep-seated caution among Chinese households, who continue to prioritize savings over discretionary spending. Fixed asset investment is also expected to remain subdued, with a year to date forecast of only 1.9 percent growth. According to ING analysis, the lack of a meaningful rebound in consumer confidence is a primary reason why headline GDP continues to face downward pressure despite continued government investment in high tech manufacturing.