China’s economy shows resilience amid energy crisis, but growth headwinds are building in World Economy News 12/05/2026 China’s economy posted 5% GDP growth in Q1 2026 despite the energy crisis triggered by the Middle East conflict, but the negative impact will surface over time as strategic buffers are depleted and inflationary pressures constrain policy responses, according to a recent report from Wood Mackenzie. With 55% of China’s crude oil imports and 30% of LNG imports at risk due to the strait closure, the country faces mounting pressure on its 2026 growth target of 4.5% to 5%. However, the immediate impact has been cushioned by strategic crude oil reserves, the ability to switch from gas to coal in power generation, and government subsidies on retail fuel prices “The impact of the Middle East conflict has been limited in March, supported by cargoes already at sea and available storage at refineries. However, with the Strait of Hormuz closure continuing in April, the looming global energy crisis poses additional pressure on the country’s growth target,” said Yanting Zhou, principal economist, Asia Pacific at Wood Mackenzie. “Our base case assumes the strait remains closed for two months, but the risk of prolonged disruption is real given the difficulty of resolving the conflict.” Zhou continued, “China’s total reserves should be able to cover import shortfalls from the Middle East for more than 270 days. The caveat is that the Chinese government only allows refineries to use commercial and refinery reserves while keeping the state reserve intact. But we estimate that non-state reserves alone should give the country a 180-day cushion, allowing the domestic economy to function without immediate rationing as Persian Gulf shipments are rerouted or halted. According to Wood Mackenzie, China has significant structural buffers that are providing near-term resilience. Coal-fired power accounted for 50% of total generation in 2025, with a capacity utilization rate of only around 50%, while gas power represented just 4% of generation. This indicates the country has a significant buffer for power generation under a gas shortage. The government is also providing subsidies to refineries that roughly cover half of the crude oil price increase, preventing a rapid rise in inflation. EV exports surge as global fuel prices climb “Another evidence of China’s structural resilience is the performance of the EV sector. EV exports surged by 77.5% year-on-year in Q1 2026, with March shipments alone jumping by nearly 140% to hit record levels. With retail fuel prices rising globally, we expect export demand for EVs to remain strong throughout 2026,” Zhou remarked. The report noted that even electric two-wheelers experienced a boost, with orders from Southeast Asia surging. According to Wood Mackenzie, exports to Myanmar, Laos, and Cambodia jumped by 617%, 26%, and 34% year-on-year in the first quarter, respectively, as smaller developing Asian economies face more imminent oil shortages. Sectoral pain points emerging across the economy While the wider economy has buffers, the negative impact of the energy crisis is gradually eroding growth momentum, with some sectors and regions feeling the pain more quickly and steeply than others, according to the Wood Mackenzie report. China’s exports to the Middle East are experiencing a sharp contraction. The region represented 7% of China’s total exports in 2025, and rerouting increases logistics costs while limitin