<div id="readability-page-1"><div>Authored by Jarvis Lim via The Epoch Times (emphasis ours),China’s already-strained economy faces mounting pressure as the Iran war threatens to choke export growth and suppress domestic demand, putting its 4.5 percent growth target at risk, experts say.<figure><img width="500" height="333" src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28510%29_1.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28510%29_1.jpg"/><figcaption>A woman takes a photo of the Lujiazui financial district across the Huangpu River on the Bund promenade in Shanghai, China, on March 5, 2026. Jade Gao/AFP via Getty Images</figcaption></figure>As the U.S.–Israeli war against the Iranian regime stretches past the two-month mark, President Donald Trump said in an April 29 interview with Axios that he will continue to maintain a blockade of Iran until Tehran agrees to a deal addressing concerns over its nuclear program.Brent crude, the global oil benchmark, briefly spiked to over $120 a barrel after Trump’s remarks, hitting a four-year high before dropping back to $114. It now sits at around $108 as of Sunday afternoon.Rising oil costs have also driven up plastic prices across Southern China, squeezing profit margins and triggering panic buying throughout the supply chain at Dongguan’s Zhangmutou—the nation’s top plastics trading hub.China is the world’s largest producer, consumer, and exporter of final plastic products, according to a 2025 report from the Organisation for Economic Co-operation and Development, an intergovernmental organization.<h2>Export Squeeze</h2>Tsai Ming-fang, a professor of industrial economics at Tamkang University in Taiwan, said that while many argue China’s strategic oil inventories would shield it from the effects of a blockade, the turmoil in China’s plastics markets shows the conflict is already weighing on its manufacturing exports.China is estimated to be holding the world’s largest crude stockpiles, at nearly 1.4 billion barrels as of December 2025 and growing in 2026, according to an analysis released in April by the U.S. Energy Information Administration.“Surging energy prices in financially unstable countries like Indonesia, Thailand, and Vietnam are squeezing out discretionary spending, dragging down China’s export shipments,” Tsai told The Epoch Times.“If consumers don’t consider these Chinese goods necessities, China’s shipment volumes will naturally fall further.”<figure><img width="500" height="333" src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28511%29_0.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28511%29_0.jpg"/><figcaption>Containers at the Longtan port in Nanjing, eastern China's Jiangsu province on Jan. 14, 2026. AFP via Getty Images</figcaption></figure>Indonesia, Thailand, and Vietnam are members of the Association of Southeast Asian Nations (ASEAN)—China’s largest trading partner—with bilateral trade reaching 6.82 trillion yuan ($999 billion) in the first 11 months of 2025.Chinese exports to the bloc totaled 4.29 trillion yuan ($628 billion) over the same period, up 14.6 percent year on year, data from the Economic and Commercial Office of the Mission of the People’s Republic of China to ASEAN showed.Echoing the concern, Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis Research, said China’s export engine is now caught in a “double bind,” with higher shipping costs driven by Hormuz disruptions and softening end-markets across Southeast Asia.“This is not yet a cliff edge, but the directional pressure [on China’s exports] is clearly downward, particularly in electronics, machinery, and mid-tier consumer goods,” Garcia-Herrero told The Epoch Times.Liu Meng-chun, director of the Chung-Hua Institution of Economic Research’s mainland China division in Taipei, said war-driven inflation in advanced economies like the United States and Europe is eroding purchasing power, stifling demand for Chinese goods and compounding the country’s chronic overcapacity.“The European Union overtook the United States as China’s second-largest export destination in 2025, but the conflict has stoked price pressures across the region, eating into the profit margins of Chinese firms,” Liu told The Epoch Times.Exports from the world’s second-largest economy grew just 2.5 percent year on year in March, a sharp pullback from the 21.8 percent expansion recorded in January and February, according to China’s General Administration of Customs.<h2>Faltering Demand</h2>On the consumer front, Chinese car sales—widely viewed as a barometer of domestic demand—are declining.Passenger vehicle retail sales in China fell 15 percent year on year in March to 1.648 million units, according to the China Passenger Car Association.Cumulative sales in the first quarter of 2026 reached 4.226 million units, down 17.4 percent from a year prior.“The prolonged stalemate in the Middle East crisis has driven international oil prices sharply higher ... suppressing the release of consumer potential,” the industry body said.<figure><img width="500" height="333" src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28512%29_1.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28512%29_1.jpg"/><figcaption>A receptionist sits near the Leapmotor T03 model displayed at a showroom in Hangzhou in eastern China's Zhejiang province on Tuesday, May 14, 2024. Caroline Chen/AP Photo</figcaption></figure>Garcia-Herrero noted that China’s domestic demand was already under strain before the Iran war, warning that the ongoing energy shock will only exacerbate the decline.“Elevated oil prices are feeding directly into transport and manufacturing input costs, squeezing household purchasing power and eroding consumer confidence,” she said.China’s consumer price index, a key gauge of inflation, rose 1 percent year-on-year in March and was down 0.3 percentage points from February, according to China’s National Bureau of Statistics.The producer price index (PPI)—a measure of costs at the factory gate—climbed 0.5 percent in March from a year earlier, reversing a 0.9 percent decline in February and marking its first rise after 41 consecutive months of contraction.But Tsai cautioned against interpreting China’s PPI increase as a sign of economic recovery.“The PPI rebound stems from energy cost pass-throughs driven by the conflict, rather than any genuine pickup in domestic spending,” Tsai said.“The latest data indicates China is likely still grappling with internal ‘involution.’”“Involution” describes a cycle in which Chinese firms compete ever more fiercely for a shrinking pool of consumers, driving down prices and profits without generating real economic growth.As the fighting in Iran persists, the erosion of both domestic spending and export growth will inevitably deal a severe blow to China’s job market, according to Liu.“The export sector has traditionally offered massive employment opportunities, but sluggish foreign trade is now constraining wage growth,” Liu said.“Under these circumstances, the unemployment rate could rise further, hidden unemployment will become more pronounced, and the labor market will continue to contract.”According to data released by China’s National Bureau of Statistics on April 21, the unemployment rate for those aged 16 to 24, excluding students, rose to 16.9 percent in March, up from 16.1 percent in February.<h2>Dimming Outlook</h2>In March, China’s State Council announced an economic growth target of 4.5 to 5 percent for 2026, its lowest since the early 1990s, not including the pandemic.<figure><img width="500" height="333" src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28513%29_0.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://files.zhedge.com/cdn-cgi/image/width=1920,quality=75,format=auto/https://assets.zerohedge.com/s3fs-public/inline-images/image_80%28513%29_0.jpg"/><figcaption>Construction workers leave a building site for a new office tower in the Central Business District in Beijing on April 3, 2025. Kevin Frayer/Getty Images</figcaption></figure>Tsai said Beijing’s decision to lower its growth target reflects its own lack of confidence in the economy, and the protracted conflict in the Middle East has only darkened the outlook further.“Unless China’s major trading partners—including Africa, Southeast Asia, and the EU—dramatically scale up imports, hitting Beijing’s growth target looks increasingly unlikely,” Tsai said.“Besides, new legislation from the EU is piling further pressure on China’s economy.”The European Commission unveiled the Industrial Accelerator Act on March 4, imposing strict screening on foreign investments exceeding 100 million euros ($117 million) in sectors that account for more than 40 percent of global capacity, such as electric vehicles, batteries, solar energy, and critical raw materials.The move—widely viewed by analysts as targeting China—drew a sharp rebuke from Beijing, which claimed the framework was “discriminatory,” and constituted “severe investment barriers.”Echoing Tsai’s assessment, Garcia-Herrero said hitting 4.5 percent growth remains “achievable on paper,” but the margin for error has narrowed considerably.“Beijing retains meaningful policy tools—fiscal stimulus, targeted monetary easing, and strategic energy reserves,” Garcia-Herrero said.“But deploying them effectively against an externally driven inflation shock is a different challenge than managing domestic cycles.”Garcia-Herrero predicted that if the Hormuz blockade extends beyond the second quarter, a revision toward 3.8 to 4.2 percent looks “increasingly likely.”“The 4.5 percent target now depends heavily on a conflict resolution timeline that China cannot control,” she said.</div></div>

China's economy is under pressure as the ongoing Iran war threatens its 4.5% growth target. Experts warn that rising oil prices are impacting export growth and domestic demand, particularly in the plastics sector. The conflict has led to increased shipping costs and reduced consumer spending in Southeast Asia, affecting China's export shipments. Additionally, domestic demand is faltering, with car sales declining significantly. Analysts predict that the energy crisis will further strain China's economic recovery, impacting both exports and consumer confidence.

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Iran War Threatens China's 4.5 Percent Growth Target: Analysts