Arya News - China’s gross domestic product (GDP) expanded 4.3 per cent in the second quarter of 2026, cooling from the robust 5 per cent growth in the first quarter, according to data released by the National Bureau of Statistics on July 15.
BEIJING – China’s economy in the second quarter grew at its slowest pace since the end of 2022, missing market expectations as persistent weakness in consumer spending, property and investment outweighed resilient exports and industrial output.
China’s gross domestic product (GDP) expanded 4.3 per cent in the second quarter of 2026, cooling from the robust 5 per cent growth in the first quarter, according to data released by the National Bureau of Statistics on July 15.
The figure came in below analysts’ forecasts, which ranged from 4.46 per cent in a poll by Chinese financial data provider Wind to 4.5 per cent in separate polls by Reuters and Bloomberg, to 4.6 per cent by HSBC and Nikkei.
The world’s second-largest economy is becoming increasingly bifurcated with exports and manufacturing, especially in high-tech sectors linked to artificial intelligence, continuing to underpin growth, while property, consumer spending and investment remained weak.
Economists describe this widening divergence as a “K-shaped” economy, with some cautioning that the stronger, export-driven segment may not be broad enough to offset the persistent weakness across the rest of the economy.
AI-related products such as chips, computers and power equipment were among the biggest contributors to China’s export growth.
Sarah Tan, an economist at Moody’s Analytics, said the strength in China’s exports extends beyond the AI boom and also reflects China’s competitiveness across advanced manufacturing, including electronics, electric vehicles, batteries and other higher value-added products.
However, exports alone are unlikely to be sufficient to support the broader economy, she said.
“The latest data continues to show weak private consumption alongside contracting private investment, suggesting that strong external demand is cushioning, but not reversing, softness in the domestic economy,” said Tan.
For the first half of the year, the economy grew 4.7 per cent, official data showed, leaving Beijing broadly on track to meet its annual target despite the weaker second-quarter performance.
Beijing has set a GDP growth target of 4.5 per cent to 5 per cent for 2026 and said it would “strive for better in practice”, departing from the “around 5 per cent” target in previous years, as policymakers grapple with several domestic and external headwinds.
Rising external risks, sluggish domestic demand, a weak labour market and a prolonged property market downturn have continued to weigh on the economy.
Separate data for June pointed to a mixed picture. Industri
al production and retail sales saw positive growth, but investment remained the weakest part of the economy, with fixed-asset investment falling 5.7 per cent in the first half of the year – a sharper decline than markets had expected.
Fixed-asset investment is a key gauge of spending on long-term assets like infrastructure and property, and is widely viewed as an indicator of business confidence and future economic activity.
The property sector remained a major drag on growth as real estate investment dropped 18 per cent in the first half of the year compared with 2025, extending a prolonged downturn that has weighed on consumer confidence and strained local government finances despite some pockets of improvement in the larger Chinese cities.
Attention will now turn to the Communist Party’s Politburo meeting later in July, where fiscal policy is expected to be in focus as the country’s top leaders typically assess the economic performance for the first half of the year and set policy priorities for the remainder of the year.
On July 13, Chinese Premier Li Qiang called for a “comprehensive and objective understanding” of the current economic situation and for “stronger counter-cyclical adjustments” during a symposium with economists and entrepreneurs.
The same day, Beijing also unveiled its first five-year plan for boosting consumption, targeting retail sales to reach around 60 trillion yuan (S$11.5 trillion) by 2030, as it seeks to make household spending a stronger driver of economic growth.
Larry Hu, head of China economics at Macquarie Group, said Li’s remarks signalled a more supportive stance, but “without a strong sense of urgency”.
Zhiwei Zhang, president and chief economist of Pinpoint Asset Management, pointed out that National Bureau of Statistics deputy head Mao Shengyong attributed the slowdown in GDP growth to “some short-term and external factors” during the press briefing announcing the GDP figure on July 15.
Zhang said the sectors most affected were petrochemical and coal production due to the oil and gas shock stemming from the conflict in the Middle East, while most other sectors remained relatively resilient.
“His statement implies that policies don’t need to change significantly as these short-term factors may fade away,” he said.
Hao Zhou, chief economist at Guotai Junan International, said expectations for an aggressive, economy-wide stimulus package should be tempered.
“Unlike previous periods of significant economic stress, China’s external sector has remained relatively resilient, with exports performing better than many had anticipated,” he said.
“As long as external demand continues to provide a meaningful cushion to growth, the authorities are likely to prefer targeted and incremental policy support rather than deploying large-scale stimulus measures.”