Yantai, China – July 14, 2026 – Containers docked at the Yantai Port International Container Terminal in Yantai, Shandong, China, on July 14, 2026.
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China’s economy expanded at the weakest pace since the fourth quarter of 2022 in the second quarter, and while consumption remained sluggish and growth was strained by an accelerating decline in investment, calls for policy stimulus grew.
Gross domestic product (GDP) grew 4.3% in the April-June period, the Office for National Statistics showed on Wednesday, lower than the 4.5% growth expected by economists polled by Reuters and slowing from 5% in the first quarter.
The second quarter’s growth was below Beijing’s 4.5-5% growth target for the year, its least ambitious target in decades, due to tensions with trading partners including the United States and the European Union and weak domestic demand.
Tiancheng Shu, senior economist at the Economist Intelligence Unit, said he expects economic stimulus, including lower interest rates to stimulate investment demand, to ramp up in the third quarter given the disappointing growth.
Fixed asset investment in urban areas, including real estate development and infrastructure projects, fell 5.7% in the January-June period from a year earlier, worse than a Reuters poll expected (4.9% decline) and a sharp slowdown from the 4.1% decline in the January-June period.
Xu pointed out that the worsening investment slump is due to local governments pouring resources into debt restructuring and a lack of eligible projects in the pipeline. “Promoting infrastructure investment will be a key focus to stabilize growth.”
China’s retail sales rose 1% in June, recovering from a 0.6% decline in the previous month and beating economists’ expectations for a 0.1% decline. Retail sales in May recorded the first monthly decline since late 2022, dragged down by weak demand and deep discounts at participating stores.
Industrial production rose 5.3% year-on-year in June, exceeding the expected 4.7% increase and gaining momentum from May’s 4.5% increase.
China’s economy is facing a deepening supply-demand imbalance. Robust industrial production and exports, driven by the global AI investment boom, continue to be key growth drivers, even as consumption and private investment have slumped due to the prolonged real estate recession and volatile energy prices.
The statistics agency pointed to a “serious” imbalance between oversupply and weak demand, and urged policymakers to strengthen “countercyclical adjustment” and “cross-cyclical adjustment.”
Urban investment fell 3.8% from a year earlier last year, the slowest in decades, as a prolonged real estate recession and tighter local government borrowing restrictions hampered one of China’s traditional growth engines.
China’s urban unemployment rate was 5% in June. The leadership aims to keep the unemployment rate below 5.5% over the next five years.
—CNBC’s Evelyn Cheng contributed to this report.
