China’s Economy Unexpectedly Weakens as Iran War Fallout Mounts
Momentum slowed across the board even as Xi Jinping was projecting strength during a Beijing summit with President Trump
By Hannah Miao
A packaging factory in Lianyungang, eastern China. Agence France-Presse/Getty ImagesBEIJING—China’s economic momentum slowed broadly in April, underscoring persistent areas of weakness in the world’s second-largest economy as risks from the Iran war mount.
The marked slowdown, which was tempered by continued strength in China’s export sector, underscores the challenges facing leader Xi Jinping at home, even as he dazzled President Trump and projected strength during a high-profile summit in Beijing last week.
A gauge of consumer spending decelerated to its slowest growth since 2022.
Industrial output, investment and the real-estate sector all showed signs of deterioration, undershooting economists’ expectations.
As China’s export machine continues to hum this year, the country’s economic growth has become increasingly lopsided, creating a global trade imbalance that has fomented geopolitical tensions.
The war in Iran, meanwhile, threatens to depress the global economy and curb demand around the world, leaving China’s economy vulnerable.
Fu Linghui, a spokesman for China’s statistics bureau, said Monday that, while the external environment has undergone dramatic changes so far this year, the situation grew even more complex in April, with the spillover effects from geopolitical conflicts showing up in the energy markets—an indirect reference to the Iran war.
“A number of unstable factors remain in the international environment and the impact of geopolitical conflicts is still playing out,” Fu said.
Last week’s summit in Beijing between Trump and Xi ended with both sides celebrating “strategic stability” between the two superpowers.
But the countries have announced few concrete deals so far that would meaningfully boost commerce between them following a bruising trade war last year that squeezed U.S.-China trade.
So far this year, China has managed to maintain robust economic growth in line with its official target, making it unlikely Beijing would rush to unleash new stimulus despite the recent weakness.
It reported gross domestic product growth of 5% for the first quarter, in line with Beijing’s official target of 4.5% to 5% growth this year.
Trade has helped drive much of China’s economic expansion to start the year.
It earlier reported 14% year-over-year export growth in April, with sales of electronic products ballooning amid a global artificial-intelligence boom.
At home, domestic demand remains tepid.
Retail sales rose just 0.2% in April from the prior year, down from 1.7% in March and marking the slowest growth rate since December 2022.
Government consumer subsidies boosted purchases of goods such as home appliances and cars last year, but the program has been scaled back.
“The strong performance of the exporters helped to mitigate the weaknesses in domestic demand, but not enough to fully offset it,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
The beleaguered real-estate sector continues to drag on consumer and business sentiment.
Property investment dropped 14% from a year ago in the January-to-April period, while construction starts fell 22% over the same stretch.
Home sales by value slid 15% during the first four months of the year.
Industrial output also saw its momentum slow, with an increase of 4.1% in April from a year prior compared with a 5.7% growth rate for March.
Fixed-asset investment fell 1.6% year-over-year in the first four months of the year.
Higher commodity prices triggered by the war in Iran could further erode profit margins for China’s manufacturers, clouding the outlook for investment.
Already, China’s factory-gate inflation rose to a 45-month high in April.
China’s urban jobless rate, the country’s headline measure of unemployment, ticked down to 5.2% last month, from 5.4% in March.
Xiao Xiao contributed to this article.
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