China's Second Quarter Economic Growth Slowed as Domestic Demand Faces Headwinds

Li Chen
15 Jul, 2026
Hong Kong

Investors turned cautious in Shanghai and Hong Kong amid mixed economic data and heightened geopolitical tensions in the Middle East. 

The Hang Seng Index increased 1.5%, and the mainland-focused CSI 300 Index inched up a fraction, tracking gains in overnight trading in New York. 

China's second-quarter GDP growth slowed to an annual rate of 4.3% from 5.0% in the first quarter, according to the National Bureau of Statistics. 

The annual economic growth was the softest since the fourth quarter of 2022 as lingering property market weakness, subdued private investment, and weak domestic demand outweighed the sustained growth in AI-related and green-tech exports. 

The latest reading came below the Politburo's target range between 4.5% and 5.0%, highlighting the uneven recovery, but the economy remained resilient with industrial output and corporate profits accelerating. 

For the first half, the economy expanded at a solid pace of 4.7%, driven by resilient exports despite disruptions to commercial shipping and geopolitical tensions in the Middle East. 

Retail sales increased 1.0% from a year in June, reversing a decline of 0.6% in May, the first fall since China lifted Covid-19 lockdowns at the end of 2022. 

Industrial output growth accelerated to 5.3% in June from 4.5% in May, largely because of the sustained demand for AI-related and high-tech equipment. 

However, fixed-asset investment dropped 5.7% in the year to June, compared to a decline of 4.1% recorded in the period to May. Property investment fell 18% in the first half compared to a decrease of 16.2% in the first five months, according to a separate report by the NBS. 

China's urban jobless rate eased to a one-year low of 5.0% in June from 5.1% in May, as the growth in the service sector helped the overall jobless rate to trend lower.  

 

China Indexes and Stocks 

The Hang Seng Index increased 1.5% to 24,695.62, and the mainland-focused CSI 300 Index edged up 0.04% to 4,798.61. 

Banks and financial services providers led the decliners in Hong Kong and Shanghai. 

China Construction Bank decreased 0.6%, Bank of China fell 0.2%, China CITIC Bank edged up 0.7%, and HSBC gained 1.9%. 

SMIC decreased 2.2% to HK $76.60; Hua Hong Grace Semiconductor fell 1.3% to HK $169.00. Eoptolink Technology declined 0.7% to ¥563.81, and Naura Technology Group eased 2.2% to ¥757.0.