China's Economy Slows in Second Quarter as Weak Consumer Spending Raises Concerns

China's economy recorded its weakest quarterly growth in more than three years during the April-June period, reflecting persistent weakness in household spending despite continued strength in manufacturing and exports.

Gross domestic product (GDP) increased 4.3% in the second quarter, slowing from 5.0% in the first three months of the year. The figure fell below both expectations and the lower end of China's annual growth target range of 4.5% to 5.0%.

Attention is now focused on the upcoming Communist Party Politburo meeting, where senior leaders are expected to review economic conditions and consider policy measures aimed at supporting growth.

Economists say the key concern is not only the pace of economic expansion but also the imbalance in its drivers. June data showed retail sales rose just 1.0%, while industrial output grew 5.3%, highlighting continued dependence on manufacturing and overseas demand as domestic consumption remains subdued.

Some consumers say they have sharply reduced discretionary spending because of lower incomes and ongoing weakness in the housing market. The prolonged property downturn has also left many rental properties vacant and reduced household wealth.

Despite the slowdown, China's economy expanded 4.7% during the first half of the year, keeping overall growth within the government's target range and reducing immediate pressure for large-scale stimulus.

Analysts believe policymakers remain cautious about increasing fiscal spending, even though many agree that stronger domestic demand is needed. However, there is still no broad agreement on the most effective way to achieve that goal.

Investment activity also continued to weaken. Property investment declined 18% year-on-year in the first six months of 2026, while fixed-asset investment fell 5.7%. State-sector investment also recorded a decline, reflecting tighter spending by local governments.

Employment conditions remain under pressure as factory layoffs linked to industrial overcapacity, U.S. tariffs and price competition continue, while wider adoption of artificial intelligence has slowed hiring in white-collar occupations. Many workers have shifted into gig economy jobs offering lower wages and limited social protections.

Exports remain the strongest contributor to economic growth. Recent trade data showed overseas shipments exceeded expectations, supported by global demand linked to artificial intelligence technologies and advance orders from U.S. retailers ahead of possible tariff increases later this year.

However, external risks continue to build. The United States is expected to review tariffs on Chinese imports, while the European Union is strengthening measures to protect its industries from Chinese competition. Ongoing tensions involving the United States and Iran are also adding uncertainty to the global economic outlook.

Economists say China is likely to continue relying on exports unless external demand weakens, which could prompt authorities to introduce stronger measures aimed at boosting domestic consumption.