Weak domestic demand and higher energy costs weigh on economy as exports remain resilient
BEIJING: China’s economic growth slowed significantly in the second quarter of 2026, with weaker domestic demand and rising energy costs linked to the Iran conflict offsetting robust export performance, according to official data released on Wednesday.
China’s National Bureau of Statistics (NBS) said the world’s second-largest economy expanded by 4.3 percent between April and June, down from 5 percent growth recorded in the first quarter. The latest figure also fell below Beijing’s annual growth target range of 4.5 to 5 percent and marked the weakest quarterly expansion since late 2022.
The data covered the first full quarter since the Iran conflict began in late February, a period that saw global oil prices climb and external economic uncertainty intensify.
Domestic economy faces continued pressure
The NBS said growing external instability and an imbalance between strong industrial supply and weak domestic demand continued to challenge the economy. Separate economic indicators reflected ongoing pressure on China’s property market and consumer spending.
New home prices declined by 0.1 percent in June, although the pace of decline eased slightly compared with the previous month. Meanwhile, retail sales increased by 1 percent after falling 0.6 percent in May, suggesting a modest improvement in consumer activity.
Market analysts said manufacturers continue absorbing higher energy and raw material costs because sluggish consumer demand limits their ability to pass those expenses on to buyers.
Exports remain a key growth driver
Despite domestic challenges, China’s export sector remained resilient. Government figures released earlier this week showed exports surged 27 percent in June compared with the same month last year.
Strong global demand for semiconductors used in artificial intelligence infrastructure supported technology exports, while overseas demand for Chinese electric vehicles continued to rise sharply. Monthly vehicle exports exceeded one million units for the first time, providing another boost to overall trade performance.
Some economists argued that the slower GDP figure also reflected Beijing’s decision to lower its official growth target earlier this year, giving policymakers greater flexibility to acknowledge existing economic weaknesses.
Analysts noted that although challenges remain, improving retail sales and resilient exports indicate that parts of the Chinese economy continue to perform strongly despite rising geopolitical tensions and global market uncertainty.
