The slowdown is explained by weak domestic demand, the persistent real estate crisis and the surge in energy prices, despite dynamic exports.
China probably saw its economic growth slow in the second quarter, according to the forecast of eleven analysts. The panel of experts surveyed anticipates growth of 4.5% year-on-year in the world’s second largest economy for the period April-June 2026. This would represent a clear slowdown compared to the 5% recorded in the first quarter, but would keep the country on the trajectory of its annual objective, set around 5%.
Running out of steam despite solid exports
China, which has made exports a pillar of its economic model, is increasingly dependent on foreign trade, at a time when a prolonged slump in its real estate sector and low consumption continue to weigh on it. Exports jumped again in the first half of 2026, driven by demand for technologies linked to artificial intelligence (AI) and automobiles: for the month of May alone, they soared by 20% year-on-year. By 2025, China had achieved a dizzying trade surplus of $1.2 trillion, a record.
High-tech sectors are thriving, with industries linked to AI and renewable energy showing “exceptional performance”, says Dan Wang of the Eurasia Group. “External demand continued to shine despite (US) tariffs and geopolitical uncertainties,” says Sheana Yue of Oxford Economics. This performance reflects “China’s increased competitiveness, market share gains, and its ability to rapidly increase production in manufacturing sectors with higher added value,” she concludes.
Domestic demand still sluggish
The Chinese economy has certainly resisted the energy shock and disruptions in supply chains, but “the weakening of global demand is having a visible negative impact on sales of entry-level consumer goods and small exporters”, observes Dan Wang. The surge in exports helps offset sluggish domestic demand and the gloomy morale of businesses and households alike, “weighed down even further by the uncertainties linked to the war in Iran”, tempers Sheana Yue. Retail sales also declined for the first time in three years in May.
The debt crisis that has plagued the huge real estate sector since 2020 is not over: once a safe haven, housing prices are stagnating after having plummeted, dissuading potential buyers from investing. “Without any sign indicating that the real estate crisis is approaching its end, it is difficult to imagine a recovery in consumption,” says Teeuwe Mevissen of Rabobank.
International context and uncertainties
The war in the Middle East, which began at the end of February, contributed to darkening the economic situation by sending oil prices soaring, at the risk of halting global growth and weakening demand for Chinese exports. The customs truce concluded at the end of 2025 with Washington is due to expire in November, while the European Union (EU) considers measures to protect its industries against what it considers unfair competition from Chinese companies. Continuing trade frictions with the United States and the EU, China’s second-largest trading partner, could undermine exports and require new efforts to boost domestic economic engines.
Outlook and expected measures
Further measures may be needed to support growth in the second half, particularly if the wave of AI-related exports runs out of steam. After focusing in recent months on debt and reforms, Beijing should “reprioritize growth, with policies to intensify investment, support services and employment”, according to Guo Shan of Hutong Research. “China’s ability to maintain its growth will depend on a significant recovery in household consumption and a return of private sector confidence,” insists Sarah Tan of Moody’s Analytics. Chinese manufacturers, including electric car manufacturers, are still banking on international expansion, outside of a national market that has become ultra-competitive.
