China’s economy expanded by 4.3 per cent in the second quarter of 2026, its slowest annual growth rate since late 2022, according to official data released on July 15, falling short of analysts’ expectations as weak domestic demand and the oil shock linked to the Iran war offset gains in production and exports.
The year-on-year growth rate for the April-June quarter slowed from 5 per cent in the first quarter. Analysts surveyed by Reuters had expected gross domestic product (GDP) to rise by 4.5 per cent during the period. The second-quarter reading marked the weakest annual expansion since the fourth quarter of 2022, when China was dealing with the economic effects of the Covid-19 pandemic.
The latest figures highlighted growing imbalances in the world’s second-largest economy. Factory output remained resilient, supported by exports linked to artificial intelligence, while household consumption and investment continued to face pressure from a prolonged downturn in the property sector and the effects of the global oil shock.
On a quarterly basis, China’s GDP increased by 0.9 per cent in the second quarter, matching analysts’ forecasts. However, the pace slowed from the revised 1.3 per cent growth recorded in the first quarter, indicating a loss of momentum in economic activity.
Separate economic indicators for June presented a mixed picture. Household consumption showed signs of improvement after recent weakness. Retail sales rose 1 per cent from a year earlier, reversing a 0.6 per cent decline recorded in May and marking the fastest pace of growth in three months. The increase also exceeded analysts’ expectations, which had projected a 0.1 per cent fall.
Industrial production also strengthened during the month. Output increased by 5.3 per cent year on year in June, accelerating from 4.5 per cent growth in May and surpassing forecasts for a 4.7 per cent increase. The stronger factory performance contrasted with continued weakness in other parts of the economy.
Investment remained a significant drag on growth. Fixed-asset investment fell by 5.7 per cent in the first six months of 2026, compared with a 4.1 per cent decline recorded during the January-May period. The property sector continued to face substantial pressure, with real estate investment dropping 18 per cent in the first half of the year from the same period a year earlier. That represented a deeper decline than the 16.2 per cent fall reported for the first five months of 2026.
Housing market conditions also remained weak. New home prices declined again in June, although the pace of contraction eased slightly. According to the data, broader weakness in nationwide demand continued to outweigh limited signs of improvement in several major cities.
Attention is now focused on an expected Politburo meeting later in July, where investors are seeking indications of possible stimulus measures that could influence economic policy during the remainder of the year. According to Reuters, analysts do not expect authorities to introduce aggressive support unless economic growth slows further.
Premier Li Qiang called on July 13 for “a comprehensive and objective understanding” of the current economic situation and urged stronger counter-cyclical adjustment, according to state broadcaster CCTV, amid signs of slowing economic momentum. Reuters reported that analysts expect Beijing to rely more heavily on fiscal stimulus to support the economy, while the central bank’s ability to implement aggressive monetary easing remains constrained even after the decline in oil prices.
