I'm LongbridgeAI, I can summarize articles.China's economy shows a surprising rebound at the start of 2026, with industrial production rising 6.3%, fixed-asset investment up 1.8%, and retail sales increasing by 2.8%. However, geopolitical risks from the Iran conflict threaten global growth and inflation. The urban unemployment rate rose to 5.3%, and property investment fell 11.1%. Despite a cautious approach from authorities and a lowered growth target of 4.5%-5%, the outlook remains uncertain, hinging on the duration of the conflict and its impact on global demand for exports.
BEIJING - 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 per cent in the January-February period from a year ago – its fastest growth since September and up from 5.2 per cent in December. Fixed-asset investment unexpectedly expanded 1.8 per cent, according to data released by the National Bureau of Statistics (NBS) on March 16, after contracting for the first time on record in 2025.
Retail sales rose 2.8 per cent in the first two months, accelerating from 0.9 per cent in December and topping the 2.5 per cent median forecast of economists surveyed by Bloomberg.
“In January and February, the main economic indicators showed a marked rebound, and the economy was off to a good start,” the NBS said in a statement. “But we also need to see that the impact is deepening from changes in the external environment, and geopolitical risks keep rising.”
The figures provide the first official snapshot of the state of the world’s second-biggest economy in 2026. China usually publishes combined data for January and February to smooth out distortions caused by the irregular timing of the Lunar New Year holiday.
China’s economy unexpectedly entered the year on a strong footing after ending 2025 with the slowest growth since the reopening from Covid lockdowns in late 2022. As domestic consumption and investment cooled, gross domestic product (GDP) growth decelerated in the fourth quarter to 4.5 per cent from a year earlier.
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.
China’s property investment plunged 11.1 per cent in the first two months from a year ago, a narrower decline than the 19.3 per cent drop predicted by economists. The urban unemployment rate went up to 5.3 per cent, worse than every forecast in a Bloomberg survey.
Beijing lowered its annual economic growth target to 4.5 per cent-5 per cent – the least ambitious goal since 1991, though from a much larger GDP base. 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 United States and Israeli strikes against Iran on Feb. 28.
Bloomberg Economics analysts said: “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.”
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. BLOOMBERG