China's economic growth decelerated significantly between April and June 2026, with official data showing a 4.3% increase in gross domestic product (GDP) for the second quarter. This growth rate fell short of Beijing's annual target and followed a 5% rise in the first quarter. The slowdown comes amid weak domestic demand and the impact of the Iran war on oil prices, despite a 27% surge in exports in June compared to the previous year.

In March, China lowered its growth target to a range of 4.5% to 5%, marking its lowest economic expansion goal since 1991. Analysts suggest this adjustment provides officials with greater flexibility in managing the economy.

The China National Bureau of Statistics highlighted increased external instability and uncertainty factors affecting the economy. It also pointed to an imbalance between strong supply and weak domestic demand. New home prices continued to decline, with a 0.1% fall in June, though at a slower pace than the previous month. Retail sales improved, rising by 1% in June after a 0.6% decrease in May.

Fabien Yip, a market analyst at investment platform IG, told the BBC that Chinese businesses are absorbing higher energy and raw material costs "because demand at the till is too weak to bear it."

This quarter represents the first full GDP data period since the Iran war began on February 28 and marks the lowest quarterly expansion since the end of 2022, when China was emerging from strict Covid-19 restrictions.

Sources