China reports lowest GDP growth in more than 3 years
Second-quarter figure falls below annual target range as monthly indicators highlight economic pressures
China has reported GDP growth of 4.3 per cent in the second quarter, the lowest reading since late 2022 when authorities lifted the country’s Covid-19 restrictions.
The data released by the National Bureau of Statistics on Wednesday was below an official annual target of 4.5-5 per cent and an expansion of 5 per cent year-on-year reported in the first quarter.
The growth figure was the lowest on record outside of the 2020-2022 period when the government implemented Covid lockdowns to contain the virus.
Monthly data released alongside the headline figure added to signs of economic pressures in China, where policymakers are grappling with a prolonged property slowdown that has weighed on consumer confidence.
Retail sales added just 1 per cent in June from a year earlier, while fixed-asset investment was down 5.7 per cent year on year for the first half of the year. Industrial production grew 5.3 per cent last month on a year earlier.
Lynn Song, chief greater China economist at ING, said China’s GDP data showed a “significant deceleration” from the first quarter.
He said that a “sharp weakening in monthly indicators”, which was “largely glossed over” in a “puzzling” first-quarter release, “showed up far more clearly in the second quarter”.
“Though the monthly activity data doesn’t translate directly into the GDP contribution, we’ve seen fixed-asset investment further crater into negative year-on-year growth [and] retail sales barely in positive territory,” he said.
“The monthly data suggest a bleak picture all around.”
Analysts surveyed by Bloomberg had forecast growth of 4.5 per cent for the second quarter. China said GDP growth was 4.7 per cent for the first half of 2026.
Unlike other major economies, China does not release quarterly breakdowns of GDP under the so-called expenditure approach — investment, consumption and net exports. This leads to a heavy focus on its monthly data series, and raises questions about their relationship to overall growth.
“The fiscal spending has been going down throughout the first five months,” Dan Wang, head of China at the Eurasia Group. “All the industry data, fiscal data . . . they can match together, they just don’t match with the GDP figure.
“The only factor that can explain this data discrepancy [between monthly indicators and GDP] is foreign demand,” she added.
“It’s impossible to do the investment and consumption side of the equation and make the accounting book work, it has to be net exports,” Wang said.
Separate data on Tuesday showed exports soared 27 per cent year on year in June, adding to signs of a heavy reliance on trade to support economic activity.
But Song noted that “net exports are actually still in negative year-on-year growth” thanks to a surge in imports.
Policymakers in China have also been grappling for years with the threat of deflation. But following the outbreak of war in Iran, China’s factory gate prices have soared, with implications for how GDP is adjusted for inflation.
Higher inflation would reduce “the support to the data from the GDP deflator”, Song said. A negative deflator stands to increase real growth compared to nominal growth.