China Economic Quarterly Q3 2026
China’s economy grew 4.7% in the first half of 2026, but momentum was uneven—strong in exports and technology, weaker in consumption and property. Our latest analysis looks at what’s driving this divergence, and what to expect in the second half as fiscal policy takes the lead, exports remain a key pillar of growth, and policymakers push structural reforms aimed at lifting consumption and steering capital toward more productive sectors. Read on for what this means for businesses and investors.
How China’s economy performed in H1 2026
- China’s economy grew 4.7% in the first half, within the government’s target. Momentum eased from Q1 to Q2, and growth was uneven across the economy.
- Exports and technology manufacturing led the way. Factories making AI hardware, semiconductors and other high-tech goods saw strong growth and rising profits, helped by global demand for AI infrastructure and clean-energy products such
as EVs. - The weaker areas were closer to home: consumers spent cautiously, with retail sales up just 1.3%, while private investment and property remained soft.
- Inflation remained low, but the trend is turning. Core consumer prices have gradually firmed since 2024, and producer prices turned positive in March, partly due to higher global energy prices.
- Borrowing costs are low, but borrowing hasn’t picked up much—a sign that willingness to spend and invest matters more than further rate cuts.
- What this means: opportunities remain strongest in sectors tied to technology and global trade, while those linked to property, big-ticket consumer goods and traditional construction are likely to stay under pressure.
What to expect in the second half of 2026
- Government spending is expected to take on a bigger role in supporting growth. The central bank, meanwhile, is expected to keep policy supportive without moving to steeper rate cuts.
- Exports should remain a bright spot, particularly in AI-related and clean-energy products, though trade tensions with the US and EU are the key wildcard to watch.
- Consumer support is likely to stay targeted rather than broad-based. The bigger shift is structural: reforms aimed at raising consumption’s share of the economy over time, with more spending on services such as healthcare, tourism
and education. - Infrastructure spending should provide some support, but fixed-asset investment is likely to stay weak overall. A fuller recovery will hinge on the property market stabilising and a genuine improvement in private-sector sentiment—both of which will take time.
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