China’s economy slowed sharply to a 4.3% annualized pace of growth in the April-June quarter, the government said Wednesday.
It was the slowest growth since late 2022 and far weaker than its strong 5% start for the year, despite a surge in exports thanks partly to the boom in artificial intelligence, and robust global demand for Chinese electric vehicles.
China has largely shrugged off wider economic impacts from the Iran war. Exports rose 17.6% in the first half of the year from a year earlier, and 27% in June, according to customs data.
But domestic spending and investment have lagged, limiting the boost from China’s export manufacturing.
For the whole of 2026, Chinese leaders have set a growth target of 4.5% to 5%, slower than last year’s 5%.
The International Monetary Fund recently raised its forecast for China’s annual growth by 0.2 percentage point to 4.6%. But it said it expects China’s economy to expand just 4.1% in 2027.
Some economists say China’s economy is becoming increasingly unbalanced as heavy state support and private investments pour into frontier technologies like AI, computer chips and robotics while other areas such as lower-value manufacturing and jobs creating services industries languish.
As is true in many countries, the expansion of AI and robotics has raised worries over whether businesses will create enough jobs to sustain growth in the longer term.
“China’s growth model has become increasingly imbalanced,” said Eswar Prasad, a professor of economics and trade policy at Cornell University.
Chinese families have cut back on spending, constrained by a prolonged property slump and uncertainties over jobs and wages.
At the same time, China’s exports of high-tech products such as electric vehicles, computer chips and other electronic equipment have risen sharply, helped by hefty government support since China’s leaders have made development of advanced technologies a top priority.
China’s economy is going through a “significant transition,” said Wei Li, Head of Multi-Asset Investments at BNP Paribas Securities (China).