Rabobank strategists have revised their outlook for China's economic growth, citing the impact of the US and Israel’s war against Iran on global markets. The conflict has led to a sharp and sustained increase in oil and gas prices, resulting in heightened global cost-push inflation risks [1]. Despite these pressures, Rabobank notes that China is relatively well-prepared for potential oil supply disruptions, leveraging its substantial reserves and diversified supplier base to mitigate the loss of Middle Eastern imports [1].
Rabobank has lowered its forecast for China’s Gross Domestic Product (GDP) growth to 4.5% for 2026, reflecting expectations of higher inflation and unemployment. Specifically, inflation is projected at 0.7% and unemployment at 5.4% in 2026 [1]. The strategists argue that, while inflation risks have increased, it is unlikely that price rises will reach levels that would force the People’s Bank of China (PBOC) to tighten monetary policy at this stage [1].
The report highlights that China’s economy will be affected through reduced exports, as global cost-push inflation dampens demand, and through lower domestic consumption [1]. However, the overall assessment is that China’s inflation will remain manageable, and the country’s preparedness for energy supply shocks provides some resilience in the face of ongoing geopolitical uncertainty [1].
CONCLUSION
Rabobank’s analysis points to a more challenging growth outlook for China in 2026, driven by war-related volatility in energy markets and global inflation. While inflation and unemployment are expected to rise, the PBOC is not anticipated to tighten policy imminently. China’s diversified energy strategy offers some buffer against external shocks, but headwinds to exports and consumption remain significant.