Summary of Key Points
In the first half of 2026, China's economy grew by 4.7% (5% in the first quarter and 4.3% in the second quarter), within the government's target range of 4.5% to 5%. However, the growth rate slowed down in the second quarter, mainly due to the cooling global economy. The article analyzes the situation from four perspectives: overall volume, economic structure, local economies, and prospects for the second half of the year. Overall, there were significant month-on-month fluctuations, but seasonal patterns are evident, and it is expected that the slowdown in the second quarter will be made up for in the second half of the year. In terms of economic structure, "new drivers of growth" (such as high-end manufacturing and the digital economy) have contributed more than 40%, while the real estate and construction industries are undergoing adjustments. Local economies still rely on investment to drive growth. In the second half of the year, policies will aim to balance the development of new industries with the smooth transformation of traditional ones.
Detailed Analysis
1. Growth Rate in the First Half of the Year: Meeting Targets, but a Slower Pace in the Second Quarter
The growth rate of 4.7% in the first half of the year is within the target range, which is considered satisfactory. However, the rate was 5% in the first quarter and 4.3% in the second quarter, indicating a slowdown. According to the National Bureau of Statistics, this is due to the global economic slowdown, which has also affected China. Nevertheless, the overall performance did not exceed expectations, so there is no need for excessive concern.
2. Overall Economic Growth: Significant Month-on-Month Fluctuations, but Seasonal Patterns Can Be Compensated For
There is a concept called "annualized month-on-month growth rate," which converts the quarterly growth (for example, the increase from one quarter to the next) into an annual growth rate. The trend from the second quarter of 2025 to the second quarter of 2026 was inconsistent: 4.9% → 4.5% → 4.5% → 5.3% → 3.6%, indicating that the growth momentum is unstable and subject to significant impacts from policies and external factors. However, China's GDP follows a seasonal pattern, with the highest growth in the fourth quarter, followed by the third quarter, and the lowest in the first quarter. Therefore, if external shocks subside in the second half of the year, the overall economic volume is expected to increase, potentially making up for the slowdown in the second quarter. If the shocks continue, additional policy measures may be necessary.
3. Structural Transformation: New Drivers of Growth Emerging, while Real Estate and Construction Industries are Adjusting
The "new" and "high-quality" aspects of economic growth are becoming evident:
- New drivers contribute over 40%: Industries such as high-end manufacturing, the digital economy, and modern services have contributed more than 40% to overall growth. For example, the information technology sector (including internet and software) grew by 10.7%, and leasing and business services (such as consulting and outsourcing) grew by 11.9%, while the construction industry declined by 4%, and real estate by 0.2%.
- New industries are mitigating pressure on traditional sectors: The adjustment of the real estate and construction industries is inevitable due to factors like a declining population and high leverage levels in the past. However, the emergence of new industries has prevented these sectors from declining too sharply. For instance, the contribution of information technology and leasing services in the second quarter nearly matched that of the construction and real estate industries.
- New industries are more sustainable: New industries require less capital per person (lower average capital investment). For example, the information service industry requires an average capital investment of 1.98 million yuan per person, compared to 11.74 million yuan for the real estate industry, indicating that new industries can grow without relying on large-scale investments and are thus more sustainable.
4. Local Economies: Still Relying on Investment to Drive Growth
Although the national government is focusing on promoting new drivers of growth, most local provinces still rely on investment. For example, using data from 2025, provinces with higher levels of borrowing (measured by the increase in social financing) and more labor have faster economic growth rates. This suggests that local economies are still using infrastructure projects and real estate to drive growth. This approach has its advantages, as it allows traditional industries to adjust gradually and prevents sudden declines, maintaining a stable transition.
5. Prospects for the Second Half of the Year: New Industries Continue to Thrive, with Policies Balancing New and Old Sectors
- Strong export performance: Export growth in the second quarter was 20.2%, and import growth was 29.5%. The contribution of net exports to GDP increased from 15.3% in the first quarter to 20.8% in the second quarter, indicating that Chinese products remain competitive on the international market.
- Stable consumption, declining investment: Consumption's contribution to GDP has remained relatively stable, while investment has declined because new industries require less capital.
- Policy direction: The national government will continue to support the development of new and high-quality productive forces, while local governments will aim to stabilize traditional sectors (such as real estate and infrastructure) to prevent rapid decline. This balanced approach will facilitate both economic transformation and minimize fluctuations.
In summary, the economy performed well in the first half of the year, and the transformation process is underway. Although there were some challenges in the second quarter, with no significant external shocks and continued growth from new industries, along with appropriate policy support, China's economy should be able to remain within the target range for the rest of the year.