China’s economic growth slows sharply, missing government target

Weak domestic demand and global tensions weigh on world’s second-largest economy

China’s economic growth slowed significantly between April and June, with official figures showing the world’s second-largest economy expanded by just 4.3% in the second quarter of 2026, below Beijing’s annual growth target.

The latest figures mark a notable decline from the 5% growth recorded in the first quarter, highlighting the economic challenges facing the country despite strong export performance.

Domestic weakness overshadows export boom

China’s National Bureau of Statistics said the economy is facing increasing uncertainty, pointing to an imbalance between strong industrial supply and weak domestic demand.

The slowdown comes despite separate data showing that Chinese exports surged by 27% in June compared with the same period last year, driven largely by growing global demand for technology products and electric vehicles.

However, economists say weak consumer spending and rising costs linked to the ongoing Iran conflict have weighed heavily on the country’s economic performance.

Property market and consumer spending remain concerns

Fresh economic data also revealed that China’s property sector continues to struggle.

New home prices declined again in June, although the pace of the decline slowed compared to the previous month.

Consumer spending showed some signs of improvement, with retail sales rising by 1% in June, recovering from a decline in May. Nevertheless, analysts say domestic demand remains too weak to support stronger economic growth.

Market analyst Fabien Yip said Chinese businesses are absorbing higher energy and raw material costs because consumers are not spending enough to pass the additional costs on to buyers.

She warned that the situation could worsen if the conflict involving Iran continues for an extended period.

Growth target lowered earlier this year

In March, Beijing lowered its economic growth target to a range of 4.5% to 5%, the country’s lowest target since 1991.

Some economists believe the reduced target has given authorities more room to acknowledge economic weaknesses that had already existed before the recent global tensions.

Capital Economics’ head of China economics, Julian Evans-Pritchard, argued that the weaker GDP figure may reflect a greater willingness by Beijing to report the country’s true economic situation rather than a sudden collapse in growth.

Technology and electric vehicles drive exports

Despite the slowdown, some sectors continue to perform strongly.

China’s technology exports received a major boost from growing global demand for semiconductors used in artificial intelligence data centres.

Meanwhile, exports of Chinese electric vehicles continued to surge, with the country’s monthly car exports exceeding one million units for the first time.

While exports remain a bright spot, economists say stronger consumer confidence and a recovery in the property market will be essential if China hopes to return to faster economic growth in the coming months.