China's second-quarter growth slows to 4.3 percent

China's economy grew 4.3 percent year on year in April-June, official data showed Wednesday, its weakest pace in more than three years and below the 4.5 percent forecast in an AFP survey of economists.

The National Bureau of Statistics reported the second-quarter figure, which was the slowest since the fourth quarter of 2022. It was also below Beijing's annual growth target range of 4.5 to 5.0 percent, described in the report as the lowest in decades.

China has been dealing with a long-running property-sector crisis and weak domestic spending, leaving leaders more reliant on exports to support growth. The report said strong exports linked to demand from the global AI boom helped offset trade disruption from the Middle East war. It also said the US-Israeli war on Iran had threatened shipping through the Strait of Hormuz, a route normally used for about a fifth of global oil and natural gas transit.

The statistics bureau said the economy operated within a reasonable range in the first half of the year. It also said there were many unstable and uncertain external factors, that the domestic problem of strong supply and weak demand was prominent, and that the foundation for improvement still needed to be consolidated.

Other official figures showed retail sales rose 1.0 percent year on year in June, compared with a Bloomberg forecast for a 0.1 percent decline. Industrial production rose 5.3 percent in June, above a Bloomberg estimate of 4.6 percent. Fixed-asset investment fell 5.7 percent year on year in the first half.

Yue Su of The Economist Intelligence Unit told AFP that domestic demand, held back by low income expectations, remained China's weakest link. She said policymakers were expected to put more emphasis on supporting consumption in the second half of the year and into early 2027, including through fiscal stimulus, higher minimum wages or wage growth directed toward frontline workers.

Zhang Zhiwei said the government was unlikely to change policy in the coming months because first-quarter GDP growth had been strong at 5.0 percent. He said that meant the government remained on track to deliver growth in line with its official annual target. He also said the export boom continued to beat expectations and would probably remain strong in the short term.

The GDP figures followed customs data released Tuesday showing exports rose 27.0 percent year on year in June, above a Bloomberg forecast of 19.0 percent. The report said the global AI boom helped increase demand for chips and computing equipment. China's semiconductor exports more than doubled in value in June from a year earlier, while data-processing equipment shipments rose 53.1 percent.

Julian Evans-Pritchard of Capital Economics said Tuesday that the rise in semiconductor exports was entirely a price effect caused by a continuing memory-chip shortage, and that semiconductor export volumes actually fell year on year in June.

The report said trade tensions with the United States and European Union remained a source of friction. China recorded a $32.9 billion trade surplus with the EU in June. It also said relations between Washington and Beijing had stabilised since US President Donald Trump visited Beijing in May, but that a trade imbalance and rivalry over chip production remained.