China’s economy expanded by 4.7% year-on-year in the first half of 2026, supported by strong high-tech manufacturing, industrial production, services and foreign trade.
However, the headline growth rate concealed an increasingly uneven economic picture. Second-quarter growth slowed to 4.3% from 5% in the first quarter, while consumer spending remained subdued, fixed-asset investment contracted and the property downturn deepened.
Official data show that China remains on course to achieve its full-year growth target of between 4.5% and 5%, although sustaining momentum will depend on whether policymakers can strengthen household demand and stabilise investment during the second half.
Key Overview
- China’s economy grew 4.7% in the first half of 2026.
- Second-quarter growth slowed to 4.3%, from 5% in the first quarter.
- Industrial output increased by 5.4%, while high-tech manufacturing grew by 13.3%.
- The services sector expanded by 5.2%.
- Total retail sales of consumer goods rose by only 1.3%.
- Fixed-asset investment declined by 5.7%, while property investment fell by 18%.
- Imports and exports increased by 16.9%, led by strong growth in both trade flows.
- The IMF expects China’s economy to grow by 4.6% in 2026.
Economic Growth Slows in the Second Quarter
China’s gross domestic product reached 69.57 trillion yuan in the first half of 2026, representing year-on-year growth of 4.7%.
Growth slowed during the second quarter, with GDP increasing by 4.3% from a year earlier, compared with 5% in the first quarter. The second-quarter result was also below the 4.5% expansion forecast by economists.
Although the slowdown was significant, the economy remained within the government’s 2026 growth target of between 4.5% and 5%. Maintaining that range for the full year will require average growth of roughly 4.3% during the second half.
The official figures indicate that China’s industrial and export sectors continue to provide support, but weaker domestic spending and investment are placing greater pressure on the wider economy.
High-Tech Manufacturing Drives Industrial Expansion
Industrial production remained one of the strongest components of China’s economy. The value added by industrial enterprises above a designated size increased by 5.4% during the first half.
Manufacturing output rose by 5.6%, while equipment manufacturing expanded by 9.3%. High-tech manufacturing recorded significantly faster growth of 13.3%.
Production of 3D-printing equipment increased by 48.5%, lithium-ion battery output rose by 39.3% and industrial robot production advanced by 28%.
These figures reflect China’s continued emphasis on advanced manufacturing, automation, artificial intelligence, batteries and other strategically important technologies.
The services sector also outperformed the broader economy, expanding by 5.2%. Information transmission, software and information-technology services grew by 10.7%, while leasing and business services increased by 11.9%.
Consumer Demand Remains Relatively Weak
Despite strong technology and industrial performance, household consumption remained subdued.
Total retail sales of goods and services increased by 2.7% during the first half. This measure included a 5.3% increase in services and growth of only 1.1% in goods.
The more commonly used measure of total retail sales of consumer goods rose by just 1.3%. June sales increased by 1% year-on-year after falling by 0.6% in May.
Weak household confidence, uncertainty over employment and the prolonged property downturn have continued to limit consumer spending. Economists have argued that further direct support for household incomes and social welfare may be needed to produce a stronger recovery.
China has released its first five-year consumption plan, targeting annual retail sales of around 60 trillion yuan by 2030.
The plan prioritises services such as healthcare, childcare, elderly care, tourism, education, sports and entertainment. It also proposes higher wages, improved social security and the removal of certain restrictions on purchases and services.
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Investment and Property Remain Major Risks
Fixed-asset investment declined by 5.7% in the first half of 2026, highlighting one of the economy’s most serious weaknesses.
Infrastructure investment fell by 2.4%, manufacturing investment declined by 1.2% and private investment dropped by 8.5%. Property development investment contracted by 18%.
Sales of newly built commercial property by floor area fell by 11.6%, while their value declined by 13.6%.
The property downturn has reduced household confidence, weakened local government finances and limited investment activity. It has also widened the imbalance between China’s strong production sector and weaker domestic demand.
Investment in high-tech industries was a notable exception, rising by 4.6%. Aerospace equipment manufacturing investment increased by 23.3%, while information-services investment grew by 15.5%.
Foreign Trade Provides Strong Support
China’s total imports and exports of goods increased by 16.9% during the first half, reaching 25.47 trillion yuan.
Exports rose by 13.4% to 14.73 trillion yuan, while imports increased by 22.1% to 10.74 trillion yuan. Trade with countries participating in the Belt and Road Initiative grew by 14.8%.
Exports of mechanical and electrical products increased by 20.1% and represented 63.5% of total exports.
The trade figures helped offset weak domestic investment and consumer demand. However, continued dependence on exports leaves the economy exposed to slower global growth, trade restrictions and changes in international demand.
IMF Raises China’s 2026 Forecast
The International Monetary Fund raised its forecast for China’s full-year growth to 4.6%, from the 4.4% projection issued in April.
The revised 2026 growth forecast reflected China’s stronger-than-expected first-quarter performance.
However, the IMF warned that higher global oil prices, prolonged uncertainty and structural economic pressures would weigh on activity during the remainder of the year.
China’s first-half performance therefore demonstrates resilience, but not broad-based strength. High-tech manufacturing, services and trade are expanding rapidly, while consumption, property and investment remain considerably weaker.
The challenge for policymakers is to rebalance growth by strengthening household spending without undermining industrial development or creating further excess production capacity.
Sources
National Bureau of Statistics of China / Reuters / International Monetary Fund
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