China is emerging as a safe haven for investors seeking refuge from the Iran war storm.

The economy is stable with the manufacturing PMI index flat of up in March and the stock market is outperforming most other major markets.

Chinese stocks are outperforming global peers since the Iran war broke out, with the market's gauge falling 4.1% compared to more than 10% in South Korea, Japan and India, Bloomberg reports.

As bne IntelliNews reported, Beijing has built up large reserves of oil and continues to import from Iran as one of the friendly countries that is allowed to transit the Strait of Hormuz. At the same time, its heavy investment into renewables to create the world’s leading “electrostate” is also cushioning the economy from the spike in energy prices.

Chinese stocks are on track to outperform their global peers and put in the strongest returns since August 2025, Bloomberg says. Since the launch of Operation Epic Fury equity indices in South Korea, Japan and India are all down more than 10%, while the Chinese market is only down 4.1% over the same period.

Goldman Sachs recommended building strategic exposure to Chinese stocks at current levels.

The stockpiles and reliance on renewables and coal for its energy means that the economy will also be sheltered from the worst of the energy and inflation shocks.

Goldman Sachs said in a note: “The Chinese economy appears better positioned amid the oil supply shock than its global peers, owing to its:

a) strategic energy diversification efforts, with crude oil and LNG accounting for 28% of China’s primary energy consumption in 2024, one of the lowest in the world. On the flip-side, alternative/renewable energy, notably nuclear, wind, solar, and hydro, now represents 40% of China’s electricity generation, up from 26% a decade ago;

b) rising oil reserves, encompassing strategic and commercial stockpiles, are close to 1.2bn barrels based on official statistics, sufficient for +110 days of oil consumption assuming the entire crude imports fall to zero; and c) continued access to oil and gas supply from energy producing nations outside of the Middle East region, Russia, Australia, and Malaysia in particular. Due to the oil shock, our economists have trimmed China’s real GDP growth forecast by 20bps, compared to 40bps for the US, and 70bps for the EM Asia ex-China economic bloc.”

China’s PMI holding up

China’s economic activity strengthened in March despite rising global energy costs linked to the Iran war, with factory output and new orders improving even as price pressures intensified, according to S&P Global.

Zichun Huang, China economist at Capital Economics, wrote that “while price pressures are picking up, the recovery in economic momentum since the end of last year has yet to be derailed by events in the Middle East”. Huang added that “the impact of the Iran War [is expected] to build in the coming months”, but noted that China “appears less vulnerable than many other countries and should only suffer a modest hit unless the conflict escalates further”.

The official manufacturing purchasing managers’ index rose from 49.0 in February to 50.4 in March, moving back into expansion territory. Beneath the headline figure, cost pressures accelerated sharply.

“The input price component surged from 54.8 to 63.9,” Huang wrote, while “the output price component also climbed, from 50.6 to a 47-month high of 55.4”, suggesting firms are passing on part of the cost increases.

Despite higher prices, factory activity remained firm. “The Iran War has so far done little to dent factory activity,” Huang noted, pointing to a rise in output and a jump in new orders to a one-year high. Export demand was a key driver, with “the new export orders index… at its highest level since April 2024”, as new orders flood in.

Domestic demand also showed tentative improvement. The official construction PMI rose from 48.2 to 49.3, which Huang attributed “likely [to] front-loaded fiscal support”.

Meanwhile, the services PMI edged up from 49.7 to 50.1, signalling a return to expansion and suggesting that “consumer spending is on the mend thanks to the recent improvement in labour market conditions”.

Policy measures have helped cushion households from rising fuel costs. Huang said “regulators have stepped in to shield households from the brunt of the increase in fuel prices”, supporting consumption.

Overall, the composite PMI rose from 49.5 to 50.5, a three-month high and broadly in line with last year’s average, indicating that momentum has stabilised even as external risks mount.