YANTAI, CHINA – JULY 14, 2026 – Containers parked at Yantai Port International Container Terminal in Yantai City, Shandong Province, China on July 14, 2026.
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China’s economy in the second quarter expanded at its weakest pace since the fourth quarter of 2022, reinforcing calls for policy stimulus as an accelerating slide in investments deepened the strain on growth, while consumption stayed subdued.
Gross domestic product growth came in at 4.3% in the April to June period, data from the National Statistics Bureau showed Wednesday, missing economists’ forecast for 4.5% growth in a Reuters poll, and slowing from 5% in the first quarter.
That second-quarter growth came below Beijing’s full-year growth target range of 4.5% to 5%, the least ambitious goal in decades, amid tensions with trade partners, including the U.S. and the European Union, and sluggish domestic demand.
Given the disappointing growth, Tianchen Xu, senior economist at Economist Intelligence Unit, expects stimulus measures to be ramped up in the third quarter, including a policy rate cut to stimulate investment demand.
Urban fixed-asset investment, including real estate development and infrastructure projects, declined 5.7% in the first six months from a year earlier, worse than expectations for a 4.9% drop in a Reuters poll, and steepening from a 4.1% contraction in the first five months.
Xu attributed the steepening investment slump to local governments channeling resources into debt restructuring and a shortage of eligible projects in the pipeline. “Boosting infrastructure investment will be a key focus for stabilizing growth.”
In June, China’s retail sales grew 1%, rebounding from a 0.6% drop in the prior month and exceeding economists’ forecast for a 0.1% fall. Retail sales in May posted their first monthly decline since late 2022, dragged down by tepid demand and merchants’ steep discounting.
Industrial output expanded 5.3% in June from a year ago, stronger than the forecast 4.7% growth, and gaining pace from 4.5% expansion in May.
Chinese economy has grappled with a deepening supply-demand imbalance. Robust industrial production and exports tied to the global AI investment boom continue to power headline growth, even as consumption and private investment weakens amid a prolonged property downturn and volatile energy prices.
The statistics bureau noted “acute” imbalance between excess supply and sluggish demand, urging policymakers to step up “counter- and cross-cyclical adjustments.”
Urban investment slumped for the first time in decades last year, falling 3.8% from a year earlier, as a prolonged property downturn and tighter constraints on local governments’ borrowing have hampered one of China’s traditional growth drivers.
Chinese urban unemployment stood at 5% in June. The leadership is targeting an unemployment rate of less than 5.5% over the next five-year period.
— CNBC’s Evelyn Cheng contributed to the report.
