China’s economy expanded at its weakest pace in more than three years during the second quarter of 2026, falling short of analyst expectations.
Gross domestic product grew 4.3% in the April to June period, according to data from the National Statistics Bureau released Wednesday, missing the 4.5% growth forecast in a Reuters poll.
The result marks a sharp deceleration from the 5% growth recorded in the first quarter, raising fresh questions about the durability of China’s economic recovery.
The second-quarter reading also fell below Beijing’s full-year growth target range of 4.5% to 5%, which is already the least ambitious annual goal set by Chinese leadership in decades.
The shortfall comes amid ongoing trade tensions with partners including the United States and the European Union, alongside persistently sluggish domestic demand that continues to weigh on growth.
Urban fixed-asset investment, which covers real estate development and infrastructure projects, declined 5.7% in the first six months of the year compared with a year earlier, worse than the 4.9% drop forecast in a Reuters poll.
That reading steepened from a 4.1% contraction recorded in the first five months of the year, continuing a troubling trend that saw urban investment fall 3.8% annually last year, its first such decline in decades.
A prolonged property sector downturn and tighter constraints on local government borrowing have increasingly undermined one of China’s most reliable traditional growth drivers.
On the consumption side, retail sales rebounded in June, rising 1% after posting a 0.6% decline in the prior month, exceeding economists’ forecast for a 0.1% fall.
May’s retail sales figure had marked the first monthly decline since late 2022, dragged down by tepid consumer demand and steep discounting by merchants struggling to move inventory.
Industrial output offered a brighter picture, expanding 5.3% in June from a year ago, ahead of the 4.7% growth forecast and improving from 4.5% expansion in May.
Robust industrial production and exports tied to the global artificial intelligence investment boom continue to support headline growth even as private investment and consumption remain under pressure from volatile energy prices.
China’s urban unemployment rate stood at 5% in June, with leadership targeting a rate below 5.5% over the coming five-year period.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the slowdown “is unlikely to trigger a meaningful shift in Beijing’s policy stance in the coming months,” citing the strong first quarter and resilient exports as factors keeping the economy broadly on track for its annual target.