China: Economic growth decelerates in the second quarter of 2026
GDP growth disappoints: China’s GDP grew 4.3% in annual terms in Q2, following 5.0% growth in the previous quarter. Q2’s reading was the weakest since Q4 2022 and undershot market expectations. In seasonally adjusted quarter-on-quarter terms, GDP grew 0.9% in Q2, following 1.3% growth in the previous quarter.
Broad-based slowdown: Compared to the prior quarter’s data, figures in Q2 softened for the services sector (+5.1% in annual terms vs +5.2% in Q1), the industrial sector (+3.0% vs +4.9% in Q1) and the agricultural sector (+3.7% vs +3.8% in Q1). Looking at underlying drivers, the economy was weighed on by soft consumer sentiment, payback after consumers had previously front-loaded some retail purchases under the government’s trade-in scheme, tight fiscal policy, and ongoing weakness in the construction and property sectors. In contrast, buoyant stock trading boosted the financial services sector.
Panelist insight: ING’s Lynn Song said:
“Overall, we expect China to be able to hit its full-year growth target of 4.5-5.0%. As things stand, risks to our 4.7% YoY full-year GDP forecast look balanced to the downside. It’s uncertain how long it will take to announce and roll out policy support to arrest the downward momentum. Without support, we’re likely to see growth continue to grind lower. However, as we are in the first year of the 15th Five-Year period, it’s likely that policymakers would prefer not to come in at the low end of this band.”