China’s economy expanded 4.3% year-on-year in the April-June quarter, the slowest pace in over three years. Official data showed the figure missed forecasts and slowed from 5% growth in the first three months of the year, despite a surge in exports driven by artificial intelligence and electric vehicles.
Lynn Song, chief economist for Greater China at ING Bank, stated this was the weakest quarterly growth since late 2022. The deceleration occurred as China’s trade surplus reached a record $1.2 trillion last year, prompting criticism from global policymakers over state-subsidized manufacturing flooding international markets.
Exports mask deeper imbalances
Exports climbed 17.6% in the first half of the year compared with 2023, with June alone posting a 27% increase, according to customs data. High-tech products—electric vehicles, computer chips, and electronics—fueled much of the rise, supported by heavy government investment in advanced industries. Economists caution the dependence on exports conceals structural weaknesses.
Eswar Prasad, a professor of economics and trade policy at Cornell University, noted the growth model has grown uneven. While manufacturing thrives, lower-value industries and service sectors, which employ more workers, lag behind. The move toward high-tech production has also raised concerns about job creation, as automation replaces traditional labor roles.
Retail sales provided a rare positive sign, increasing 1.0% in June from a year earlier after declining in May. Communication equipment and cosmetics led the recovery, though large purchases like cars remained weak. Industrial production exceeded expectations, rising 5.3% in June, up from May’s rate.
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For many households, the slowdown feels less like statistics and more like hesitation. Wages in service jobs, which employ nearly half the workforce, have not risen, while property prices continue to fall. The government’s push for higher-quality growth may help long-term output but offers little relief for workers outside the tech sector.
Government pledges stability amid uncertainty
Mao Shengyong, deputy head of China’s National Bureau of Statistics, acknowledged the sharp imbalance between supply and demand. He cited an unstable global situation and said authorities would focus on strengthening the domestic market and supporting jobs, though details remain limited.
The government has set a 2026 growth target of 4.5% to 5%, below last year’s 5% goal. First-half growth averaged 4.7%, the data showed. The International Monetary Fund recently raised its 2024 forecast for China by 0.2 percentage points to 4.6%, though it expects growth to slow to 4.1% by 2027.
Wei Li, head of multi-asset investments at BNP Paribas Securities (China), called the economy’s changes a major transition. With global demand for Chinese goods cooling, it remains uncertain whether domestic consumption can compensate. The outcome is still unclear.
Factories continue operating, and ports remain busy. The gap between strong exports and weak domestic confidence suggests the slowdown reflects a lasting shift rather than a temporary dip.