China Q2 growth slows sharply and misses target as domestic demand weakens
China's economy grew by 4.3% in the second quarter of the year, official figures showed, marking a sharp slowdown from the 5% expansion recorded in the first quarter. The result fell below Beijing's annual growth target and came as weak domestic demand and the impact of the Iran war on oil prices weighed on activity. The data covers the period from the start of April to the end of June and is the first full quarter since the war began on 28 February.
Sponsored
The figures were released alongside other indicators suggesting a mixed picture for the world's second-largest economy. Exports rose by 27% in June compared with a year earlier, extending a run of strong external demand. At the same time, retail sales increased by 1% in June after a 0.6% fall in May, while new home prices fell again, although the monthly decline of 0.1% was slightly smaller than the previous month.
The slowdown highlights the pressure on policymakers as they try to balance external strength with persistent weakness at home. China cut its annual growth target in March to a range of 4.5% to 5%, the lowest expansion goal since 1991, giving officials more room to manage the economy if conditions worsen. Analysts have said the lower target reflects the scale of the challenge facing Beijing as it tries to support growth without adding too much financial risk.
The latest data also points to the uneven nature of China's recovery. Strong exports, including demand for semiconductors linked to artificial intelligence data centres and higher shipments of electric vehicles, have helped offset some domestic softness. But the property market remains under strain, and consumer spending has not yet recovered enough to provide a broad-based lift to growth.
Sponsored
The timing of the slowdown matters because China's economic performance has implications well beyond its borders. As the world's second-largest economy, weaker growth can affect global trade, commodity demand and market expectations for policy support. The added pressure from oil prices linked to the Iran war also shows how external shocks can feed into domestic economic conditions.
What remains unclear is how much further support Beijing may decide to provide if domestic demand stays weak in the coming months. Investors will be watching for signs that policymakers are prepared to act more forcefully on property, consumption and broader stimulus measures. The next round of data will help show whether strong exports can continue to offset the drag from the home market.
Sponsored
