China’s economy grew at the slowest pace in over three years in Q2

China’s economy grew at its slowest rate in more than three years during the second quarter, falling short of expectations as weak household consumption overshadowed resilient manufacturing and export performance. The slowdown has renewed concerns about the long-term sustainability of China’s export- and investment-led growth model.

Gross domestic product (GDP) expanded by 4.3% year-on-year in the April–June period, down from 5.0% in the first quarter and below the government’s full-year growth target range of 4.5% to 5.0%.

The weaker-than-expected data increases pressure on Beijing to introduce additional economic stimulus. However, many analysts believe the Communist Party’s Politburo is unlikely to announce significant policy measures at its closely watched meeting later this month, citing concerns over rising debt levels.

Other economic indicators painted a mixed picture. Retail sales increased by 1.0% in June after declining 0.6% in May, while industrial production accelerated to 5.3% from 4.5% in the previous month. The figures underscore China’s continued dependence on external demand to support growth, even as trading partners raise concerns about persistent trade imbalances and geopolitical tensions, including the conflict involving Iran, weigh on the global economy.

Trade data released on Tuesday reinforced this trend, showing that strong overseas demand continues to offset weak domestic consumption. Exports surged 27% year-on-year in June, up from 19.4% in May and well above market expectations, while the trade surplus widened significantly. The strength in exports was driven largely by robust demand linked to the global artificial intelligence boom, highlighting the sector’s growing role as the primary engine of China’s economic growth.