China's Growth Plummets to Lowest Level Since 2022 Amid Weak Domestic Demand
China’s economic growth slowed sharply in the second quarter of this year, with weak domestic demand emerging as a primary trigger for the downturn in the world’s second-largest economy. The impact of the Iran war, which triggered a surge in global oil prices, also cast a shadow over economic performance. These external and internal factors ultimately offset the strength of China’s export performance.
According to official gross domestic product (GDP) data, the economy grew by just 4.3% in the April to June period. This figure is significantly below the annual target set by Beijing and marks a notable decline from the 5% growth recorded in the first quarter. The slump occurred despite a massive export surge, with government data showing the value of Chinese exports skyrocketing by 27% in June compared to the previous year.
This latest GDP report is the first full quarterly record since the Iran war erupted on 28 February. It represents the lowest quarterly expansion for the Chinese economy since the end of 2022, when the country was emerging from strict Covid-19 restrictions. In March, the Chinese government had already slashed its economic growth target to a range of 4.5% to 5%, the lowest expansion goal set by Beijing since 1991. Analysts believe the target cut was a deliberate move to give officials greater flexibility in managing the country’s economic dynamics.
A note from China’s Statistics Bureau highlighted more external instability and uncertainty, alongside an imbalance between strong supply and weak demand within the domestic economy. Separate data released on Wednesday further underscored the severity of the domestic challenges facing Beijing, including a prolonged property market slump and weak consumer spending. New home prices contracted again in June, although the 0.1% decline was at a slightly slower pace than the previous month.
On a more positive note, the retail sales sector showed signs of recovery, growing by 1% in June and reversing a 0.6% drop recorded in May. China’s technology export sector also benefited from soaring global demand, particularly for semiconductors needed in artificial intelligence data centres. A surge in global demand for electric vehicles provided a massive contribution to foreign trade performance, with China’s monthly car exports surpassing one million units for the first time in history.