China’s economy expanded 4.3% year-on-year in the second quarter, slowing from 5.0% in the first quarter and missing expectations of 4.5%. It marked the weakest pace of growth since 2022. That left first-half GDP growth at 4.7%, only narrowly within Beijing’s full-year target range of 4.5% to 5.0%. The figures underline an economy that continues to lose momentum despite pockets of resilience, with domestic demand remaining the principal weakness.
June’s activity data, however, painted a somewhat more encouraging picture. Industrial production accelerated from 4.5% to 5.3% year-on-year, comfortably beating expectations, while retail sales returned to growth at 1.0% after contracting -0.6% previously. Those gains suggest manufacturing activity and household spending improved toward the end of the quarter.
Nevertheless, investment remained a significant drag. Fixed asset investment fell -5.7% year-to-date, a steeper decline than the -4.1% fall recorded previously, while property investment contracted -18.0% in the first half of the year, extending one of the economy’s most persistent headwinds.
National Bureau of Statistics Deputy Director Mao Shengyong described the economy as having operated “within an appropriate range” during the first half of the year, but acknowledged that rising external uncertainty and weak domestic demand continue to weigh on the outlook. He emphasized the need to strengthen the domestic market, cultivate new sources of growth and provide greater support for employment.
Economic Data
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| GDP (Q2, YoY) | 4.3% | 4.5% | 5.0% |
| Industrial Production (YoY) | 5.3% | 4.7% | 4.5% |
| Retail Sales (YoY) | 1.0% | -0.1% | -0.6% |
| Fixed Asset Investment (YTD, YoY) | -5.7% | -4.9% | -4.1% |
| Property Investment (H1, YoY) | -18.0% | — | -16.2% |
Market Takeaways
- Q2 GDP slowed more than expected, marking China’s weakest annual growth since 2022.
- Industrial production and retail sales both exceeded forecasts, suggesting activity improved toward the end of the quarter.
- Domestic demand remained the economy’s weakest link despite the rebound in retail sales.
- Fixed asset investment deteriorated further, while the property sector remained a major drag on growth.
- The mixed data reinforce expectations that Beijing will need to rely more on domestic demand and structural policy support to meet its full-year growth target.
- The divergence between improving monthly activity and slowing quarterly GDP suggests the recovery remains uneven rather than broad-based.
