The report points out that China's real GDP grew 4.7% year on year in H1 2026, remaining within the government's 4.5%–5.0% annual growth target. However, growth lost momentum in Q2. Real GDP growth eased to 4.3%, down 0.7 percentage points from Q1, while seasonally adjusted quarter-on-quarter growth slowed to 0.9%, the second-lowest reading for the same period in the past decade. While real activity softened, nominal growth improved. Nominal GDP growth accelerated to 5.9% in Q2, up 1.0 percentage point from Q1.
The economy also showed a widening K-shaped divergence across four areas: External demand outperforms domestic demand; emerging industries outperform traditional sectors; services outperform industry; and higher-tier cities outperform lower-tier cities. This was particularly evident in property markets, where in tier-one cities show early signs of stabilisation, while lower-tier cities remain under pressure.
Looking ahead, the July Politburo meeting reaffirmed that expanding domestic demand will remain the government's top policy priority in H2. Fiscal policy is expected to accelerate spending and advance investment on the "Six Networks". On consumption, the 15th Five-Year Plan for Expanding Consumption, for the first time, sets a target of around RMB 60 trillion in total retail sales of consumer goods by 2030, suggesting that consumption policies will be implemented more pragmatically.
