China’s exports slowed down sharply ​in March as the war in the Middle East led to a rise in energy and transportation costs, hurting global demand and exposing the risks in Beijing’s strategy of leaning on manufacturing to sustain growth.

The world’s ⁠second-largest economy surged into 2026 on red-hot AI-fuelled electronics demand, raising ⁠expectations it could eclipse last year’s $1.2 trillion record trade surplus.

But the conflict has disrupted global growth, leaving China especially vulnerable as it has relied on foreign demand to offset a prolonged inability to revive consumption at home.

Outbound shipments grew by ​just 2.5% in March, customs data showed on Tuesday, a five-month low, and far below the ​21.8% surge ⁠seen over the January-February period. Economists had forecast growth of 8.3% in a Reuters poll.

“Export growth to major destinations slowed across the board,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, attributing the drop to global uncertainty over the Iran war.

“I think China’s trade surplus will shrink this year, as China cannot pass through the higher energy prices completely to foreign consumers,” he added.

The signs are already evident: China’s March trade surplus came in at just $51.13 billion, far below expectations of $108 billion.

Surge in imports

A sharp 27.8% surge in imports – the strongest since November 2021 – weighed on the balance. That compared with a 19.8% increase in January-February and forecasts for 11.2% growth.

China’s status as the world’s largest manufacturer and energy importer leaves it acutely exposed to a global energy shock. Diversified supplies and large oil reserves offer some protection, but uncertainty over the conflict’s duration risks undermining artificial intelligence-fuelled demand for chips and servers, blurring the growth picture.

Even China, long criticized by trading partners for subsidy-backed, cut-price manufacturing, ⁠is ⁠not insulated from the hit to buyers’ purchasing power as fuel and transport costs rise.

Separate gross domestic product (GDP) data due on Thursday is expected to show the $19 trillion economy regaining some momentum in the first quarter, but full-year growth is set to slow to 4.6% from last year’s 5.0%, broadly in line with the official target of 4.5%-5.0%.

Chinese goods more competitive?

Chinese goods will be “even more competitive” as the energy shock “pushes up the price in most of the countries” more than in China, said Chen Bo, senior research fellow at the National University of Singapore’s East Asian Institute.

Chen expects global demand for Chinese-made electric vehicles to increase.

Fred Neumann, HSBC’s chief Asia economist, said China could stand to benefit from taking the decision in the early 2000s to stockpile commodities, as it could help blunt the impact ⁠of raw-material shocks on factory gate prices.

China’s exports of refined oil products rose 20.5% month-on-month, totalling 4.6 million metric tons.

Disruptions to global energy supply lines will be felt in China, even if it’s not yet showing up in the data.

Natural gas imports for March dropped by an annual 10.7%, the lowest level since October 2022, ​with Chinese ships diverting between eight and 10 cargoes over the course of the month to sell where prices are higher, according to ICIS, ​Kpler and Vortexa data.

Crude oil imports also fell 2.8% year-on-year, but this was predominantly due to a high base effect, with March arrivals having been loaded onto ships before the war began.

The figures were further muddied by the seasonal effects of a ⁠late Lunar New Year ‌national holiday, ‌said Xu Tianchen, senior economist at the Economist Intelligence Unit, during which factories shut as workers down ⁠tools to celebrate.

“This explains the decline across the low-value-added sectors, textiles, garments, bags, toys, ‌furniture, as they are reliant on migrant workers,” Xu said.

A high base is also a drag, after Chinese factories rushed shipments a year earlier to beat U.S. President ​Donald Trump’s April 2 “Liberation Day” tariff deadline.

March factory activity ⁠data out of China showed goods exports continued to support growth, but the war in Iran ⁠weighed on sentiment as commodity prices rose sharply, lifting input costs.

Some analysts expect sustained tech demand to underpin Chinese exports.

“For Q1 as a whole, ⁠export growth rose to its ​highest level in four years,” said Zichun Huang, China economist at Capital Economics.

“Despite the energy price shock, exports should stay solid in the coming quarters, thanks to strong demand for semiconductors and green technologies.”

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Danish pharmaceuticals giant Novo Nordisk, maker of the Ozempic and Wegovy anti-obesity drugs, announced Tuesday a “strategic partnership” with ChatGPT developer OpenAI to accelerate the development of new medications and bring them to patients faster.

Like other drugmakers, Novo Nordisk is banking heavily on artificial intelligence to test new treatments and vaccines and bring them to market faster for less money.

Novo Nordisk said the partnership would place it “at the forefront of AI transformation in health care and help the company bring new and better treatment options to patients faster.”

No financial details of the partnership were disclosed.

“This collaboration with Novo Nordisk will help them accelerate scientific discovery, run smarter global operations, and redefine the future of patient care,” OpenAI CEO Sam Altman said.

Pilot programs will be launched across several business areas “with full integration by the end of 2026,” the statement added.

Novo Nordisk has seen its share price slide as it has slashed prices to meet rising competition, particularly from its U.S. rival Eli Lilly.

It has also faced competition from copycat versions of Ozempic and Wegovy, and last month it took legal action against the U.S. telehealth chain Hims & Hers after it began selling so-called compounded versions of the injectable.

Currently, it can take more than a decade to develop a drug, and out of ten candidates, only one manages to reach the market.

According to industry analysts, the average research and development cost to bring a new drug to market is around $2 billion.

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The founder of China’s troubled Evergrande Group, the world’s most indebted property developer, pleaded guilty to several charges, including misuse of funds, ⁠fundraising fraud and illegally taking public deposits, ⁠a court in China’s southern city of Shenzhen said.

The company has defaulted since 2021 on most of its $300 billion in liabilities – a sign of troubles emblematic of China’s property ​sector woes that have long dragged on economic growth.

Founder ​Hui Ka ⁠Yan “pleaded guilty and expressed remorse” in trial proceedings on Monday and Tuesday against him and Evergrande, the court said in a posting on its official WeChat account.

The liquidators of Evergrande declined to comment on the case.

Reuters was unable to seek comment from Hui, 67, who has not been seen in public since Chinese authorities detained him in 2023, following the default of Evergrande.

Verdicts to be issued later

Hui and the company also face charges of illegally extending loans, fraudulently issuing securities and bribery by units, the Shenzhen Municipal Intermediate People’s Court added, with verdicts to be handed down later, though it did not ⁠set ⁠a date.

The company’s failure to repay billions of dollars of wealth management products unleashed frustration among the lower and middle classes, many of whom had investments wiped out, provoking protests and threatening social stability.

Jail for life and confiscation of property are the maximum penalties for illegal fundraising, while bribery can also bring life terms.

In 2024, China’s securities regulator fined Hui, formerly one of China’s richest men, $6.6 million and barred him from the securities market for life, after finding Evergrande’s flagship unit had inflated earnings and committed ⁠securities fraud.

A former steel technician, Hui, raised by his grandmother in a rural village in central Henan province, built his fortune on the back of low-priced homes.

After founding Evergrande in 1996, he turned it ​into China’s biggest property developer by contracted sales, aggressively taking on debt.

New ventures

He also did not shy away from new ventures, dabbling in electric cars and soccer, both a passion of Chinese President Xi Jinping.

In 2017, Hui ⁠was ‌Asia’s richest ‌man with a net worth of $45.3 billion, according to Forbes. ⁠By 2023, his net worth was estimated at $3 billion.

In ‌2024, Evergrande received a liquidation order from a Hong Kong court and was kicked off the Hong Kong ​stock exchange last year, bringing an ⁠end to a tumultuous boom-and-bust saga.

Outside mainland China, Evergrande’s liquidators ⁠have battled in court to freeze offshore assets of the founder and his ex-spouse in ⁠a struggle to claw ​back $6 billion in dividends and remuneration paid to Hui and other former executives.

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Bank of Japan Governor (BOJ) Kazuo Ueda said on ⁠Monday that uncertainty over the conflict in the Middle East was leaving markets unstable, warning that it could also hurt factory output, thus signalling the bank’s escalating alarm over the economic hit from the protracted war.

Ueda also stressed the need ​for vigilance against fallout from the Iran war in explaining ​the ⁠outlook for monetary policy, rather than sticking to the BOJ’s script pledging to keep raising interest rates.

“Global financial markets are unstable, and crude oil prices are rising sharply due to Middle East tensions. We must be vigilant to future developments,” Ueda was quoted as saying in a speech read by his deputy, Ryozo Himino.

“Given lingering uncertainty over the Middle East situation, we will scrutinize how future developments affect the economy, prices and financial conditions, as well as risks and likelihood of our baseline projections materializing.”

Markets watched his speech closely for hints on whether the BOJ would raise interest rates this month, chances of ⁠which ⁠have receded as fading hopes for an end to the Iran war keep markets volatile and muddy the economic outlook, sources told Reuters.

Shift from March guidance

The reference to the uncertainty is a shift from March’s guidance, when the BOJ said only that it would keep raising rates in line with improvements in the economy and prices.

In his speech, Ueda said a gradual economic recovery was keeping underlying inflation on track to hit the BOJ’s target of 2%, with companies offering solid pay increases in ⁠this year’s wage talks.

But he warned that rising crude oil prices would hurt Japan’s economy, as a protracted Middle East war could weigh on factory output amid supply chain disruptions.

Ueda’s focus on downside economic risks ​suggests the BOJ is becoming less convinced that its growth and price projections will materialize, said Mari ​Iwashita, executive rates strategist at Nomura Securities.

Delaying rate hikes

Delaying rate hikes is not without cost, as that could cause unwelcome yen falls, ⁠push up ‌import costs ‌and broader inflation, analysts say.

Japan’s benchmark bond yield jumped to ⁠a 29-year high on Monday, fuelled partly by investors’ ‌concern that surging oil costs would add to mounting inflationary pressures.

While higher oil costs would push up energy ​prices in the short-term, they could ⁠exert both upward and downward pressures on underlying inflation, Ueda said.

“If ⁠the output gap worsens, that could weigh on underlying inflation,” he added.

“On the other ⁠hand, if rising crude ​oil prices heighten the public’s medium- and long-term inflation expectations, that could push up underlying inflation.”

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The Middle East war will dominate global finance ​officials’ talks this week in Washington, but World Bank President Ajay Banga is sounding the alarm about a bigger, looming crisis: a huge gap in jobs for the 1.2 billion people who will ⁠reach working age in developing countries in the next 10 ⁠to 15 years.

At current trajectories, those economies will generate only about 400 million jobs, leaving a deficit of 800 million jobs, Banga told Reuters.

The former Mastercard CEO admits that focusing people on the long-term is daunting, given a series of ​short-term shocks that have buffeted the global economy since the COVID-19 pandemic, the most recent being ​the ⁠war in the Middle East.

He says he’s determined to ensure that finance officials stay focused on those longer-term challenges like creating jobs, connecting people to the electricity grid and ensuring access to clean water.

“We have to walk and chew gum at the same time. Short-velocity cycle is what we’re going through. Longer velocity is this jobs circumstance or water,” Banga said in an interview taped on Friday.

War overshadows other concerns

Thousands of finance officials from around the globe will gather in Washington this week for the spring meetings of the World Bank and the International Monetary Fund under the shadow of the U.S.-Israel war with Iran that threatens to slow global growth and jack up inflation.

The extent of the hit to the economy will depend on the durability of a two-week cease-fire announced by President Donald Trump last week, just hours before promised strikes that Trump said would destroy Iran’s civilization.

The cease-fire has halted most attacks. But it has not ⁠ended Iran’s ⁠effective blockade of the Strait of Hormuz, which has caused the biggest-ever disruption to global energy supplies.

Weekend talks between the U.S. and Iran brokered by Pakistan failed to reach a deal to end the war. Starting on ⁠Monday, the U.S. military said it would begin a blockade of ships leaving Iran’s ports, and Tehran threatened to ​retaliate against ports of its Gulf neighbors.

Improving job creation

The World Bank’s governing body, the Development Committee, outlined plans to work with developing countries to streamline policy and regulatory conditions that have hampered investment and job creation for years.

Discussions will touch on transparency around permits, anti-corruption, labor law, land law, impediments to opening a business, logistics, better trade systems, and non-price barriers in trade, Banga said.

He is upbeat that solutions can be found to help find employment – and dignity – for young people and create opportunities for private companies catering to their needs. “I don’t know that you can ever get to a situation of utopia and everybody is taken care of in ⁠the coming 15 years. I would doubt that’s going to happen, but if you don’t do it, the implications are quite severe in terms of illegal migration and instability,” Banga said. United Nations data showed more than 117 million people were displaced worldwide as of 2025.

Banga said companies in developing countries themselves were starting ​to expand globally, including India’s Reliance Industries and the Mahindra Group, and Dangote in Nigeria.

Banga said his discussions with officials in developing countries showed ​their interest in creating more – and better jobs – for the next generation.

In addition to jobs, water will be a big focus. The World Bank, in conjunction with other development banks, is set to announce a push to ensure that one ⁠billion more people ‌have secure access to ‌clean water, adding to existing initiatives to connect 300 million households in Africa with electricity, ⁠and to improve health care.

Pulling in private sector

The World Bank focused on human ‌and physical infrastructure required for the jobs creation push during last fall’s meetings of the IMF and World Bank, and will continue the cycle with an emphasis on attracting ​private sector investment during this fall’s meetings in Bangkok, ⁠Banga said.

The bank identified five sectors that would benefit from investment and are not reliant on ⁠global trade or outsourcing from developed countries: infrastructure, agriculture for small farmers, primary health care, tourism and value-added manufacturing. Those sectors are less ⁠likely to be immediately affected by ​advancements in artificial intelligence, he said.

“The problem is, we can’t do this alone. We’ve got to get this snowball to roll downhill, gathering a lot of snow as it goes along, to reach that amazing number of 800 million,” he said.

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Treasury and Finance Minister Mehmet Şimşek will hold a series of high-level meetings in the U.S. this week, engaging with global investors and financial institutions on the sidelines of the IMF-World Bank spring meetings.

Şimşek will join top finance officials from around the world will convene under the shadow of the war in the Middle East, which has delivered a third major shock to the global economy after the COVID pandemic and Russia’s full-scale invasion of Ukraine in 2022.

Weekend talks between the U.S. and Iran brokered by Pakistan failed to reach a deal to end the war that has effectively shut the Strait of Hormuz, sending energy prices soaring and causing the worst ever disruption in supplies.

Starting on ⁠Monday, the U.S. military said it would begin a blockade of ships leaving Iran’s ports on Monday, and Tehran threatened to ​retaliate against ports of its Gulf neighbors.

Şimşek began his trip in New York City and was scheduled to attend a roundtable jointly organized by Citigroup and the Turkish-American Business Council. He was also said to hold a bilateral meeting with Citigroup CEO Jane Fraser.

In addition, Şimşek is expected to meet real sector representatives at an event organized by JPMorgan Chase and the top Turkish business association, MÜSIAD, as well as representatives of international credit rating agencies and leading global investors.

Global focus shifts to Washington

Following his New York program, Şimşek will travel to Washington for the International Monetary Fund-World Bank meetings, which kicked off on Monday and will last through Saturday.

The gatherings bring together finance ministers, central bank governors, private sector leaders and academics.

Top IMF and World Bank officials last week said they would downgrade their forecasts for global growth and raise their inflation predictions as a result of the Iran war, warning that emerging markets and developing countries will be hit hardest by higher energy prices and supply disruptions due to the effective closure of the Strait of Hormuz.

The U.S. military said it would begin a blockade of all maritime traffic entering and exiting Iranian ports ​and coastal areas starting at 10 a.m. ET (1400 GMT) on Monday. Washington has sought help to reopen ​the strait ⁠from allies, who have not expressed interest.

Before the Iran war broke out on Feb. 28, both institutions had expected to lift their growth forecasts given the resilience of the global economy – even in the wake of major tariffs imposed by U.S. President Donald Trump beginning last year. But the war has delivered a series of shocks that will slow progress on recovering growth and beating back inflation.

The World Bank’s baseline estimate now projects growth in emerging markets and developing economies of 3.65% in 2026, down from 4% in October, but sees that number dropping as low as 2.6% if the war lasts longer. Inflation in those countries was now forecast to hit 4.9% in 2026, up from the previous estimate of 3%, and could spike as high as 6.7% in the worst case.

The IMF warned last week that ⁠about 45 million additional people could also face acute food insecurity if the war persists and continues to disrupt fertilizer shipments needed now.

The IMF and World Bank are racing to respond to the latest crisis and support vulnerable countries at a time when public debt levels have reached record levels and budgets are tight.

The IMF said it expects demand for $20 billion to $50 billion in near-term emergency support to low-income and energy-importing countries. The World Bank has said it could mobilize some $25 billion through crisis response instruments in the near-term, and up to $70 billion in six months, as needed.

‘Shock to system’

But economists are urging governments to use only targeted and temporary steps to ease the pain of higher prices for their citizens, since broader measures could fuel inflation.

“Leadership matters, and we’ve come through crises in the past,” World Bank President Ajay Banga told Reuters, lauding work on fiscal and monetary controls that had helped economies weather previous storms. “But this is a shock to the system.”

Countries now face a tough balancing act managing inflation while keeping an eye on growth and the longer-term challenge of creating enough jobs for the 1.2 billion people who will reach working age in developing countries by 2035.

IMF and World Bank also face a far different global landscape with tensions running high between the U.S. and China, the world’s largest economies, and the Group of 20 (G-20) major economies hobbled in its ability to coordinate a response.

The U.S. currently holds the rotating presidency of the ⁠G-20, which also includes Russia and China, but it has excluded another member – South Africa – from participation, complicating the group’s ability to coordinate on this crisis.

“You’re trying to operate on consensus when there’s no consensus in the world right now on anything,” said Josh Lipsky, chair of international economics at the Atlantic Council.

Lipsky said statements by the IMF, World Bank and other multilateral lenders about their readiness to support countries hit hard by the war were clearly aimed at reassuring markets.

“It’s a signal to private creditors. This is not a time to flee countries that are in problematic waters. They will have support from the multilateral development banks and the international financial institutions. This is not going to be COVID. This is something that we can handle.”

Tougher conditions for many

Mary Svenstrup, a former senior U.S. ⁠Treasury official now with the Center for Global Development, said many emerging market and developing economies entered the crisis worse off than just a few years ago, with lower buffers, higher debt vulnerabilities and lower reserves.

“We need to have this crisis be a catalyst for IMF stakeholders to really rethink how the Fund supports vulnerable countries with the recognition that we’re going to be seeing more global shocks,” she said. “We can’t ask them to sacrifice growth and development for the sake of rebuilding buffers.”

Svenstrup said countries should pursue more ambitious reforms if ⁠they received fresh funds. “There probably does need to be more financial support from the (international financial institutions) but it needs to be affordable, and it needs to be in the context of reform programs and potentially broader debt relief,” she said.

Martin Muehleisen, a former IMF strategy chief who is now with the Atlantic Council, agreed, saying the IMF should work with donor countries to accelerate debt restructuring for borrowers and “get them off the debt cycle.” New lending should be tied to a credible ⁠debt-reduction road map, he said.

Eric Pelofsky, vice president at the Rockefeller Foundation, said low-income and lower middle-income countries paid twice the amount to service their debts in 2025 than before COVID, limiting funds for education, health care and other critical social programs. Half were now in or near debt distress, up from a quarter, just a few years ago.

“This new conflict threatens any recovery that occurred since the pandemic or the Ukraine war, and it takes countries that have basically been treading water, trying to stay away from default, and keeps them in a long term debt-growth-investment trap,” he said.