China's economy grew at its slowest pace since the end of 2022 in the second quarter, missing Beijing's annual target as the Iran war and weak domestic demand overshadowed a surge in exports.
Official gross domestic product figures showed the world's second-largest economy expanded by 4.3% between April and June, down from 5% in the first quarter and below the government's target range of 4.5%-5% set in March. That target was already the lowest since 1991, a move analysts said gave officials more flexibility in managing the economy.
“China's GDP grew just 4.3% in Q2, missing target, as Iran war and weak domestic demand hit.”
The slowdown marks the first full quarter of GDP data since the Iran war began on 28 February, and underscores the pressure on Chinese policymakers from both external instability and persistent internal problems. "There are more external instability and uncertainty factors," China's National Bureau of Statistics said in a statement accompanying the figures, noting an imbalance between strong supply and weak demand at home.
Separate data released on Wednesday highlighted the challenges Beijing faces. New home prices fell again in June, albeit at a slightly slower pace than the previous month — a 0.1% decline compared to earlier contractions. Retail sales, a key gauge of consumer spending, rose 1% in June after a 0.6% drop in May, but analysts said demand remains too fragile to absorb rising costs.
Fabien Yip, a market analyst at investment platform IG, told the BBC that Chinese businesses are absorbing higher energy and raw material costs "because demand at the till is too weak to bear it." She warned the situation will become harder to manage the longer the Iran war continues.
Yet China's export engine roared in June, with overall exports up 27% from a year earlier. Tech exports were boosted by soaring global demand for semiconductors to power artificial intelligence data centres. Surging demand for Chinese electric vehicles also helped push monthly car exports above one million for the first time.
The mixed data leaves Beijing walking a tightrope: strong exports are masking deep cracks in domestic consumption and a property slump that shows no sign of ending. With the Iran war adding fresh uncertainty to oil prices and supply chains, the question is whether the government's low growth target will be enough to cushion what lies ahead.