China feels a second shock

China’s exporters are being hit by a new shock from the Iran war, with higher raw-material and shipping costs starting to cut into orders and factory hiring. (bbc.com) At the Canton Fair in Guangzhou on April 17, plastics manufacturer Shao Haixia told Reuters her raw-material costs had jumped 20% since the war began, and she could not fully pass those increases on to overseas buyers. (reuters.com) China’s March exports rose 2.5% from a year earlier, down sharply from the combined 21.8% surge in January and February, while imports posted their strongest growth in more than four years as energy and commodity costs climbed. (cnbc.com) That slowdown is landing after a year when China still managed a record trade surplus of nearly $1.2 trillion, even as manufacturers redirected sales away from the United States and toward other markets. (tradingeconomics.com) Beijing had already lowered its 2026 growth target to 4.5% to 5% on March 5, the first time in decades it set the goal below 5%, reflecting weaker domestic demand, deflation pressure and trade tensions with Washington. (cnbc.com) Factory data showed some resilience before the latest shock. China’s official manufacturing purchasing managers’ index, a monthly survey of factory activity, rose to 50.4 in March from 49.0 in February, and the new export orders index improved to 49.1, still below the 50 mark that separates expansion from contraction. (tradingeconomics.com) (ustlfsci.hkust.edu.hk) The Iran war hits China through energy as well as demand. The U.S. Energy Information Administration said flows through the Strait of Hormuz accounted for more than one-quarter of global seaborne oil trade and about one-fifth of global oil and petroleum product consumption in 2024 and early 2025. (eia.gov) China is the world’s biggest crude importer, and Reuters reported on April 14 that Middle East supply disruptions tied to the war were already expected to weigh on April refinery runs and imports. (reuters.com) Official data still showed China’s economy grew 5.0% in the first quarter, released on April 16, but that strength was built on export momentum from before the conflict deepened. (cnbc.com) The immediate question is whether exporters can absorb another cost shock after surviving tariffs, weak prices and a property slump at home. At the Canton Fair, that answer already looked tighter than it did a month ago. (bbc.com) (reuters.com)