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China’s economy expanded faster than expected in the first quarter, giving Beijing a firmer platform as it confronts the fallout from the war involving Iran, but the details beneath the headline number pointed to a recovery still leaning heavily on industry and exports while households remain cautious. Official data released on Thursday showed gross domestic product grew 5.0% from a year earlier in January to March, above the 4.8% forecast in a Reuters poll and up from 4.5% in the final quarter of 2025. Quarterly growth came in at 1.3%, slightly ahead of the previous quarter.

The stronger reading suggested that the first shockwaves from the conflict in the Middle East have not yet knocked China off course. Markets took the figures as a sign of resilience. Mainland share indices rose after the release and the yuan held near its strongest levels in three years, reflecting confidence that the world’s second-largest economy has, for now, absorbed higher energy risks better than some had feared.

Yet the composition of growth was less reassuring. March industrial output rose 5.7% from a year earlier, beating expectations, but retail sales slowed to 1.7%, well below forecasts and down from 2.8% in the first two months of the year. Fixed-asset investment in the first quarter rose 1.7%, also missing expectations, while property investment fell 11.2%. Those figures reinforced a pattern that has defined China’s economy for months: factories, infrastructure and technology manufacturing are carrying more of the load than domestic consumption or housing.

That imbalance matters because Beijing has repeatedly signalled that stronger household demand is essential to putting growth on a steadier footing. Economists cited in the reporting on Thursday said the first-quarter strength was driven largely by momentum built in January and February, especially through exports and industrial activity, while March showed signs of softer conditions. The slowdown in shop spending is particularly sensitive because consumer confidence has remained fragile even as policymakers talk up support for incomes, jobs and services-led demand.

The war has complicated that task without yet derailing it. Since hostilities erupted on 28 February, China has faced a familiar vulnerability: it is the world’s largest energy importer and still relies on stable global shipping and manageable oil prices to protect factory margins and household purchasing power. Reuters reported that economists believe China has so far weathered the shock because of large oil reserves, a diversified energy mix and price controls, but they also warned that persistently higher oil costs are beginning to filter through supply chains and squeeze profits.

Evidence of that pressure is already visible. Reuters noted this week that factory-gate prices in March rose for the first time in more than three years, a signal that energy-driven cost increases are feeding into production. Export growth, which had been one of the brighter spots, also lost momentum in March after a very strong start to the year, raising the possibility that manufacturers will find it harder to sustain their pace if shipping costs stay elevated and overseas demand weakens.

Beijing’s response is likely to stay measured unless the conflict worsens. Policymakers have already set a budget deficit of about 4% of GDP for 2026 and planned heavy bond issuance to support activity. Analysts polled by Reuters expect the central bank to keep the one-year loan prime rate steady through the year, with only a modest cut to reserve requirements anticipated later on. A stronger first quarter gives officials more room to avoid large-scale stimulus at this month’s Politburo meeting, though that calculus could change if oil prices climb further or exports weaken more sharply.

The broader international backdrop is not especially forgiving. The IMF said in its April World Economic Outlook material that the Middle East conflict is lowering growth expectations for advanced economies in 2026, even if the aggregate effect is described as modest. For China, that matters less through direct battlefield exposure than through energy costs, shipping uncertainty and the health of major overseas markets. A prolonged conflict would test the durability of China’s export-led strength at the same time as its consumer recovery remains incomplete.

Malaysia is positioning itself as a discreet diplomatic channel between Gulf capitals and Tehran, with Prime Minister Anwar Ibrahim saying leaders from the Arab world have asked Kuala Lumpur to convey their concerns to Iran’s leadership as governments search for ways to contain the Middle East conflict. Anwar made the remarks in Putrajaya on 16 April during a joint appearance with Australian Prime Minister Anthony Albanese, adding a new dimension to Malaysia’s response after it had already secured passage for its vessels through the Strait of Hormuz through direct engagement with Tehran.

The comments suggest Malaysia sees room to act beyond its traditional Southeast Asian brief at a moment when the war-linked shock in the Gulf is reverberating through energy markets, shipping lanes and food supply chains far beyond the region. Anwar’s statement also points to how some Gulf states may be looking for intermediaries that maintain workable ties with Iran while still being able to speak with a broader range of governments. Malaysia has presented itself as a neutral actor, and Anwar has argued that any contact with Tehran should be aimed at de-escalation rather than tactical positioning inside the conflict.

His remarks fit into a chronology that has been building for weeks. On 26 March, Anwar said Iran had agreed to allow Malaysian-flagged vessels to pass through the Strait of Hormuz after he held talks with leaders from Iran, Egypt, Turkey and other regional states. He thanked Iran’s president for facilitating the release of Malaysian oil tankers and their crews, while also acknowledging that Tehran remained wary because of what he described as broken assurances and the lack of firm security guarantees.

That earlier intervention mattered because the Strait has become one of the most sensitive pressure points in the wider confrontation. Iran’s restrictions and the broader conflict have disrupted oil and gas shipments, pushed governments to seek alternative supply arrangements and revived fears over the security of one of the world’s most important maritime corridors. ASEAN foreign ministers, in a virtual meeting on 13 April, urged the United States and Iran to sustain negotiations toward a permanent resolution and called for the restoration of safe and continuous navigation for vessels and aircraft through the Hormuz corridor.

Malaysia’s diplomatic posture is being shaped as much by economic exposure as by political calculation. Reuters reported this week that Kuala Lumpur and Canberra agreed to strengthen energy and trade ties in response to disruption caused by the Middle East conflict, with Anwar saying Petronas would prioritise supplying Australia with excess fuel. That followed reporting on Albanese’s 14-17 April visit to Brunei and Malaysia, where fuel security and fertiliser supply were central themes as Canberra sought to cushion the impact of the Hormuz disruption.

For Malaysia, that means diplomacy cannot be separated from domestic cost pressures. The government has already had to manage the implications of tighter oil and gas supplies, and Anwar said in March that while fuel subsidies would stay, Putrajaya would move to reduce subsidised fuel allocations to contain the fiscal strain. The message was that Malaysia’s outreach to Tehran is not only about foreign policy profile; it is also about protecting shipping, energy flows and household stability at home.

The broader regional setting helps explain why Gulf states might see value in using a country such as Malaysia as a messenger. Several governments in the Gulf are recalibrating how they deal with Tehran after the conflict exposed both their vulnerability to retaliation and the limits of outside security guarantees. At the same time, alternative mediators are emerging. Pakistan’s army chief was in Tehran on 16 April for talks linked to possible new US-Iran negotiations, underscoring how middle powers across Asia are trying to create off-ramps before the ceasefire window narrows further.

Malaysia is unlikely to become a formal broker on its own, and Anwar has not claimed such a mandate. What he has done is signal that Kuala Lumpur is already part of a live diplomatic relay, trusted by some Arab leaders to transmit messages to Tehran and willing to use that access in support of a political settlement. That role may suit all sides precisely because it is informal, low-key and tied to a country that has avoided the sharper alignments defining the conflict.

The slowdown matters because overseas sales have been doing much of the heavy lifting for China while the property downturn and soft household spending continue to restrain growth at home. Economists surveyed by Reuters expect the economy to have expanded 4.8 per cent in the first quarter, up from 4.5 per cent in the previous three months, but they also see the outlook dimming as the Middle East conflict pushes up input costs and clouds demand in key markets.

March’s figures suggest that what had looked like a strong start to the year is becoming harder to sustain. Earlier gains had been supported by front-loaded shipments, strong demand for artificial intelligence-linked electronics and a rebound in some advanced manufacturing exports. That mix is now facing a harsher external backdrop. The conflict involving Iran has disturbed energy markets, with the Strait of Hormuz under severe strain and oil prices climbing towards the $100 a barrel mark, a level that raises transport, production and logistics costs across Asia and Europe.

Imports into China, by contrast, jumped 27.8 per cent in March, the strongest increase since late 2021. Part of that rise reflected demand tied to semiconductors, components and technology supply chains, but it also pointed to stockpiling and shifting trade flows as businesses prepared for a more volatile energy and freight environment. The divergence between softer export growth and surging imports may complicate Beijing’s effort to keep its large trade surplus intact through 2026.

Pressure from the Iran conflict is being transmitted through more than one channel. China remains heavily exposed to imported energy, and although it has reserves and a diversified supply base, higher crude and gas costs squeeze manufacturers’ margins and can erode the price competitiveness that has underpinned the country’s export machine. Reuters reported that March also brought the first rise in factory-gate prices in more than three years, indicating that cost pressures are building just as external demand becomes less predictable.

There are also direct trade effects. Reuters reported that crude and natural gas imports fell as the regional conflict disrupted flows. OPEC, in its first formal assessment of the war’s economic effect, cut its forecast for second-quarter global oil demand by 500,000 barrels a day, saying the conflict had become a meaningful drag on consumption and trade. For export-oriented economies such as China, that points to a tougher environment in which customers abroad may curb discretionary spending while producers face steeper energy bills.

Yet the picture is not uniformly bleak. China’s technology and clean-energy manufacturers still have areas of strength that could cushion the blow. Overseas demand for electric vehicles, batteries and solar equipment has been supported by the same oil shock that is hurting traditional exporters. Associated Press reported that Chinese new-energy vehicle exports continued to surge in March, while another AP analysis said the energy crisis was sharpening global interest in Chinese clean-tech supply chains. Those sectors are unlikely to offset every weakness, but they do show that the country’s export story is becoming more uneven rather than simply weaker across the board.

That unevenness is visible across product categories. Lower-value consumer goods such as clothing, furniture and other labour-intensive shipments were hit by seasonal factors and softer foreign demand, while higher-end electrical and AI-linked exports remained more resilient. South Korea’s sharp rise in exports to China, driven by chip demand, underlined the point that advanced technology supply chains are still expanding even as broader goods trade loses pace.

Beijing now faces a familiar policy dilemma made more acute by war. It wants to preserve growth without adding excessive leverage, support exporters without worsening trade tensions, and stabilise domestic demand while avoiding another debt-fuelled property cycle. Current forecasts still place full-year growth within the official 4.5 to 5 per cent target range, but many analysts now expect a weaker second quarter than they did before the Iran crisis deepened. Fiscal support, bond issuance and selective easing remain on the table, though officials appear cautious about deploying a large stimulus immediately.

The early-April figures reinforce a broader pattern already visible through the first quarter. South Korea, one of the world’s most closely watched export economies because of its central role in memory chips, displays and consumer electronics, has been benefiting from a steep recovery in semiconductor sales after a prolonged industry downturn. Reuters reported at the end of February that the country’s chip exports had jumped 160.9 per cent in that month alone, passing $20 billion for a third straight month as AI investment and stronger memory prices lifted demand.

Semiconductors were again the main engine in the latest 10-day release. Chip exports surged 152 per cent from a year earlier, underscoring how heavily South Korea’s trade performance is now tied to data-centre investment, high-bandwidth memory demand and the wider AI build-out led by large technology firms. That strength has helped offset a less even backdrop in other parts of the economy, where investment, household demand and external policy risks remain more mixed.

The export rebound matters well beyond monthly trade headlines. South Korea’s central bank raised its 2026 growth forecast to 2.0 per cent in February and signalled that a chip-led upswing was giving policymakers more room to hold interest rates steady while watching inflation and financial stability risks. Reuters also reported this month that central bank officials see strong semiconductor exports and an extra budget as factors easing downward pressure on growth, even as won weakness and higher energy costs complicate the inflation outlook.

Factory data has pointed in the same direction. A Reuters report on S&P Global survey findings showed South Korea’s manufacturing activity expanded in January at the fastest pace in nearly a year and a half, helped by stronger export orders from China, North America and Europe. Manufacturers reported improving optimism as orders strengthened in sectors such as autos and semiconductors, indicating that the recovery is not only statistical but also visible in production and order books.

Still, the trade picture is not free of risk. South Korea remains highly exposed to swings in global demand, to US trade policy and to supply disruptions linked to tensions in the Middle East. Reuters polling before the March trade data showed imports rising sharply as higher oil prices pushed up the energy bill, even while exports surged on semiconductor strength. That combination can support headline trade values, but it also leaves the economy vulnerable to a renewed squeeze from commodity inflation and currency volatility.

Another uncertainty lies in concentration. The same chip boom that is lifting exports also raises dependence on a narrow cluster of products and companies. South Korea’s trade resilience is being powered largely by memory and advanced semiconductor demand, especially products linked to AI servers. Investment plans such as SK Hynix’s announcement in February of 21.6 trillion won in new facilities show confidence in long-term demand, but they also underline how central the semiconductor cycle has become to the country’s broader growth model.

For now, the momentum remains hard to ignore. Reuters polling ahead of the March data had already pointed to the fastest export growth in nearly five years, with shipments to the United States and China both showing strong gains alongside the semiconductor surge. Monday’s early-April figures suggest that pace has carried into the second quarter, strengthening the case that South Korea’s exporters are entering another period of outsized performance after a weak stretch in 2025.

TCL Electronics is exploring the sale of a stake in its television manufacturing business in India to local buyers, in a move that could help the Chinese consumer electronics group expand more deeply in one of the world’s fastest-growing electronics production bases, according to people familiar with the matter. Bloomberg reported the company is working with an adviser and is seeking to raise at least $200 million from the proposed stake sale.

The deliberations point to a broader shift in strategy for global electronics groups operating in India, where policy support for domestic manufacturing, supply-chain localisation and greater local participation in ownership are increasingly shaping investment decisions. India approved more than $750 million in projects for electronic component manufacturing at the end of March and has set a target of lifting electronics output to $500 billion by fiscal 2031, up from $125 billion in the year to March 2025.

TCL has spent years building out its industrial footprint in the country. The group’s Tirupati manufacturing base, unveiled as its largest such facility outside China, was designed to produce TV and mobile phone screens at scale. Economic Times reported the plant was built with annual capacity for eight million large-sized TV screens and 30 million small-sized mobile screens.

That industrial push has since been reinforced by TCL CSOT India, the company’s display-panel arm, which said it had completed three production lines with monthly capacity of 1.2 million units and was moving towards full bonding, lamination and assembly operations with capacity reaching two million units a month. The company said the India operation was supplying panel modules to customers including Samsung, underscoring that the business is not only about selling finished televisions under the TCL brand but also about embedding itself in the wider supply chain.

A partial stake sale to domestic investors would therefore carry strategic weight beyond capital raising. It could give TCL stronger local alliances, improve regulatory comfort, and help the company navigate a market where manufacturing, sourcing and ownership are increasingly entwined with industrial policy. It may also position the business more favourably in dealings with state governments, suppliers and large retail channels as competition intensifies across the television segment. The company has not publicly announced any transaction, and the talks may not lead to a deal.

For TCL, India matters not just as a sales market but as a production and export platform. The company’s 2024 annual report showed it shipped 29 million televisions worldwide last year, with global market share by shipments rising to 13.9%, placing it among the top two TV brands globally, according to Omdia data cited by the company. The same report said TCL ranked among the top three in retail sales volume in nearly 20 overseas markets and recorded strong growth across emerging markets, including the Middle East and Africa.

Those figures help explain why TCL may be seeking a structure that allows it to preserve momentum in India while adapting to local realities. India is becoming harder to treat as a simple import destination. Policy incentives are encouraging assembly, component manufacturing and deeper supply-chain integration, while geopolitical tensions and tariff shifts are prompting multinational groups to diversify production beyond a single geography. For television makers, that means scale alone is no longer enough; local manufacturing depth and political acceptability also matter.

The move also reflects a wider pattern among Asian electronics manufacturers, many of whom have expanded capacity in India to reduce dependence on imports and align themselves with official manufacturing goals. Reuters reported in late March that New Delhi’s incentive programmes are aimed at cutting import dependence and strengthening local supply chains. That policy environment has created room for both foreign and domestic investors, but it has also made partnership structures more attractive than wholly externally controlled operations in sensitive or high-volume sectors.