MNI: China's Slower Q2 GDP Points To More Pro-growth Measures

Source: MNI

Update: Jul 14th, 2026  12:40 PM

China's economy likely slowed in the second quarter from Q1's 5.0%, with additional policy support likely needed in the second half to achieve the upper end of the government's 4.5-5.0% annual growth target amid export uncertainty and weaker consumption, and investment, advisors told MNI.

Advisors and economists estimated Q2 GDP will likely print between 4.5-4.8%, with a higher H2 result requiring stronger fiscal support and targeted monetary easing.

While the economy could still achieve 5% growth this year due to favourable base effects, this would require H2 growth above 4.8%, said Cai Tongjuan, vice dean of the Chongyang Institute for Financial Studies at Renmin University, supported by faster government bond issuance, further interest-rate cuts, targeted monetary tools to boost consumption, increased purchases of unsold housing inventory and stronger efforts to ensure developers complete unfinished housing projects.

Gong Liutang, director of the Institute for Advanced Study at Wuhan University, predicting around 4.6% for Q2, expects a growth of 4.7-4.8% in both H2 and 2026.

While some economists have called for additional stimulus, including new special treasury bond issuance as early as the Politburo meeting later this month, Gong argued such measures are more likely around September or October should growth risk falling below the target range. (See MNI INTERVIEW: China Likely To Announce New Fiscal Stimulus: https://www.mnimarkets.com/articles/mni-interview-china-likely-to-announce-new- fiscal-stimulus-1783584458169) Authorities have yet to complete around half of this year's planned CNY1.3 trillion in special treasury bond issuance, while fiscal revenue improved in H1, reducing the urgency for additional stimulus, he said.

Wen Bin, chief economist at China Minsheng Bank, who forecasts full-year growth of around 4.7%, expects Q2 GDP to expand about 4.5%. H1 fixed-asset investment growth likely further expanded the previous 4.1% fall to contract by 4.5%, while June retail sales may also decline further by 0.8% from May's -0.6%, although industrial output may edge up to 4.6% in June from 4.5% earlier, he added.

The National Bureau of Statistics will release Q2 GDP and June activity data on Wednesday.

EXPORT DRIVER

Gong said exports would remain the economy's main driver in H2, likely repeating their strong contribution in 2025, when they accounted for more than 30% of GDP growth. However, fixed-asset investment, which uncharacteristically fell by 4.1% in the first five months, is likely to remain negative, he warned.

Although official estimates suggest the government's push to develop the so-called "six networks", including power grids and computing infrastructure, could generate as much as CNY7 trillion in investment this year and lift headline investment growth by 2-3 percentage points, Gong argued the bigger challenge is the failure to crowd in local government and private investment. High debt-servicing costs and weak business confidence continue to limit the multiplier effect, he said.

Cai added the slow pace of project-backed special bond issuance and weak returns on infrastructure projects are limiting the effectiveness of government-led investment, while manufacturing investment is also constrained by low-capacity utilisation. She expects fixed-asset investment growth to remain subdued in 2026, expanding around 2-3% year-on-year.

Cai also questioned the sustainability of strong export growth, arguing it is likely to slow in H2 as weaker external demand, a higher base of comparison, and persistent global uncertainties weigh on shipments, reducing exports' contribution to economic growth.

"If domestic demand fails to recover sufficiently in H2, the export slowdown could shave about 0.2-0.5 pp off full-year GDP growth," she explained.

Gong added that consumption will likely contribute more than 60% of annual growth. He expects retail sales growth to turn positive in H2 as measures to repair household balance sheets take effect, also highlighting the stronger performance of services consumption, which rose 5.4% y/y in January-May compared with 1.2% growth in goods consumption. He called on authorities to redirect part of the subsidies currently allocated to consumer goods trade-in programmes to services spending.

Whether consumption recovers in H2 will depend on progress in stabilising the property market and the effectiveness of employment policies, Cai said, adding consumer vouchers alone are unlikely to reverse the trend.