China’s growth slowed to a three‑year low in the second quarter, with the National Bureau of Statistics reporting a 4.3% expansion for the April‑June period, the weakest pace since the fourth quarter of 2022.
Weak domestic demand offsets export gains
The figure fell short of the 4.5% forecast from economists surveyed by AFP and missed Beijing’s 4.5‑5.0% annual target, which officials have described as the lowest in decades. Retail sales rose only 1.0% year‑on‑year in June, beating a Bloomberg estimate of a 0.1% decline, while industrial production climbed 5.3% in the same month, surpassing a 4.6% expectation.
However, fixed‑asset investment contracted 5.7% on a year‑on‑year basis in the first half of the year, showing the persistent weakness in domestic spending. Analysts attribute the slowdown to a prolonged property‑sector crisis and a “strong supply‑weak demand” contradiction, as noted by the NBS in its statement.
Exports surged, driven by a global artificial‑intelligence boom that boosted demand for chips and computing equipment. June data showed a 27% year‑on‑year rise in export value, with semiconductor shipments more than doubling and data‑processing equipment shipments up 53%.
Policy outlook and external pressures
Yue Su of The Economist Intelligence Unit warned that low income expectations keep domestic demand as China’s “weakest link.” She suggested policymakers may need to focus on consumption, possibly through fiscal stimulus or higher minimum wages, to shore up growth through 2027.
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Analyst Zhang Zhiwei cautioned that the government is unlikely to shift its policy stance in the short term, pointing to a strong first‑quarter GDP growth of 5% as evidence that officials remain on track to meet the annual target.
External factors remain volatile. The ongoing US‑Israeli conflict on Iran threatens shipping lanes through the Strait of Hormuz, a key route for Chinese trade. Tensions with the United States and the European Union also persist, with China recording a $32.9 billion trade surplus with the EU in June.
While the export boom appears robust, some experts note that the surge reflects higher prices rather than volume, as memory‑chip shortages continue to drive up semiconductor values.
In the broader context, the slowdown highlights the challenge of balancing export‑driven growth with internal demand. A sustained reliance on overseas markets can leave the economy vulnerable to geopolitical shocks, such as the recent disruptions in the Middle East.
Despite the mixed data, the Chinese government has not announced new stimulus measures, and the policy mix is expected to remain steady for the remainder of the year.
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