China’s economic growth slowed significantly in the second quarter of the year as weak domestic demand and the economic effects of the Iran conflict outweighed the country’s strong export performance.
Official figures released by China’s National Bureau of Statistics showed that the country’s gross domestic product (GDP) expanded by 4.3% between April and June, down from the 5% growth recorded in the first quarter and below the government’s annual target.
The latest figures were released a day after data revealed that China’s exports surged by 27% in June compared with the same period last year, highlighting the continued strength of its overseas trade despite challenges at home.
Earlier this year, Beijing lowered its economic growth target to between 4.5% and 5%, marking its lowest annual goal since 1991. Some economists believe the revised target allows authorities to more openly acknowledge underlying economic weaknesses.
The second-quarter report is the first comprehensive GDP update since the Iran conflict began in late February and represents China’s slowest quarterly economic expansion since the country emerged from its strict COVID-19 restrictions at the end of 2022.
In its report, the National Bureau of Statistics pointed to rising global uncertainty and external risks while also highlighting the imbalance between strong industrial production and weak domestic consumer demand.
Additional economic data released alongside the GDP report underscored ongoing concerns over China’s property sector and consumer spending.
New home prices declined again in June, although the pace of the decline slowed to 0.1% compared with the previous month. Meanwhile, retail sales recorded a 1% increase, recovering from a 0.6% decline in May.
Market analysts said many Chinese businesses are absorbing higher energy and raw material costs because weak consumer demand has limited their ability to pass those costs on to buyers. They warned that prolonged instability resulting from the Iran conflict could further strain the country’s economy.
Other economists argued that the weaker GDP figures may partly reflect Beijing’s decision to adopt a lower growth target rather than a sudden deterioration in economic conditions. They noted that the latest data is more consistent with independent estimates of China’s actual economic performance.
Analysts also pointed to encouraging signs in the June figures, with improvements recorded across several key economic indicators.
China’s export sector continued to benefit from rising global demand for semiconductors used in artificial intelligence data centres. Strong international demand for Chinese-made electric vehicles also boosted trade, with the country’s monthly vehicle exports surpassing one million units for the first time.
