China's GDP growth slows to its lowest since 2022. Q2 growth slips to 4.3%

China's economy slowed in the second quarter, recording its weakest growth since 2022. 

Weak domestic demand and higher energy costs linked to the US-Iran war outweighed strong export growth.

Data released by the National Bureau of Statistics (NBS) on Wednesday showed that the world's second-largest economy expanded 4.3% year-on-year in the April-June quarter, down from 5% growth in the January-March period and below the country's annual growth target. 

For the first half of 2026, China's gross domestic product (GDP) grew 4.7% year-on-year, with economic output reaching 69.57 trillion yuan (about $10.25 trillion).

Don't Miss: India doubles down on mobile manufacturing; Cabinet approves Rs 62,500 crore mobile PLI 2.0

Weak Demand Offsets Export Strength

The GDP figures came a day after official customs data showed China's exports surged 27% year-on-year in June, highlighting the economy's increasing dependence on overseas demand as domestic consumption remained weak.

According to the NBS, the economy is facing "more external instability and uncertainty factors" while continuing to grapple with an imbalance between strong industrial production and subdued domestic demand.

The slowdown also reflects the continued drag from China's prolonged property market downturn, weak consumer confidence, and rising external risks.

Must Read: 500% tariff cut to 100%: India, China face reduced tariffs under revised US Russia sanctions bill

Property Slump Continues

Official data showed that new home prices declined 0.1% in June from the previous month, although the pace of decline moderated.

Property investment, a key drag on growth, fell 18% in the first half of the year, compared with a 16.2% decline in the January-May period.

Meanwhile, industrial output rose 5.3% year-on-year in June, improving from 4.5% growth in May.

China's overall urban unemployment rate stood at 5% in June, while unofficial estimates put unemployment among those aged 16-24 at more than 15%.

AI And EV Exports Cushion Economy

Customs data released on Tuesday showed that exports received a boost from surging global demand for semiconductors used in artificial intelligence (AI) data centres.

Demand for Chinese electric vehicles (EVs) also strengthened, with the country's monthly car exports crossing one million units for the first time, according to customs data.

Economists See Demand Divide

"Overall, the second-quarter data highlights a deepening divergence between domestic and external demand," Tan Junyu, regional economist for North Asia at trade credit insurer Coface, told the South China Morning Post.

"While export performance was being underpinned by AI hardware and green-tech demand, domestic consumption was being weighed on by the property slump," he said.

Su Jian, an economics professor at Peking University, said Beijing was unlikely to introduce broad-based stimulus measures in the coming months. However, he said authorities could announce additional support focused on "new infrastructure" in the second half of the year as investment growth weakens and policymakers seek to contain systemic risks.

Government Sticks To Growth Outlook

China lowered its annual growth target in March to 4.5%-5%, the lowest since 1991, to give policymakers greater flexibility in responding to domestic and global economic challenges.

Releasing the latest data, Mao Shengyong, deputy head of the NBS, said the current growth pace remained "in line with the annual target."

"Although growth moderated in the second quarter, the economy has remained on a stable footing, with its underlying trend toward innovation-driven and high-quality development unchanged," Mao said.

He added that while the external environment had become "more complex and uncertain," China's economic resilience had enabled it to effectively navigate risks and challenges, pointing to adequate energy supplies, mild inflation and solid foreign trade performance during the first half of the year.

(With inputs from PTI)