China's economy grew at its slowest annual pace since the fourth quarter of 2022 as weak domestic demand and a prolonged property downturn continued to weigh on growth.
Gross domestic product grew 4.3% year over year in the second quarter, down from 5% in the first quarter, according to data released by the National Bureau of Statistics on Wednesday.
The headline reading missed the consensus market forecast for 4.5% growth, as tracked by Investing.com.
On a seasonally adjusted quarterly basis, gross domestic product expanded 0.9%, matching market expectations but easing from 1.3% growth in the previous quarter.
Industrial production rose 5.3% year over year in June, accelerating from 4.5% in May and exceeding the 4.7% consensus forecast.
Retail sales increased 1% from a year earlier in June, rebounding from a 0.6% decline in May and beating expectations for a 0.1% contraction, suggesting consumer spending showed signs of improvement.
However, fixed asset investment fell 5.7% in the first six months of the year, compared with market expectations for a 5% decline and a 4.1% drop in the January-May period.
Property investment remained under pressure, falling 18% in the first half of the year after declining 16.2% in the first five months, highlighting the prolonged weakness in the real estate sector.
The latest data point to an uneven recovery in the world's second-largest economy, with stronger manufacturing output and a rebound in consumer spending helping offset persistent weakness in investment and the property market.
The figures come in the same week as Beijing unveiled its first five-year plan focused on boosting consumption, targeting annual retail sales of about 60 trillion yuan by 2030.
The plan aims to raise household incomes, improve social security and public services, and encourage spending on elderly care, childcare, healthcare, tourism, sports, and education.
It also calls for promoting new consumption models, including digital and AI-powered consumption, while easing restrictions on sectors such as housing, automobile purchases and entertainment.
"Reviving consumption is the harder job. It takes time to rebuild household confidence," Reuters quoted Kenneth Goh, director of private wealth management at UOB Kay Hian, as saying.
"On the ground, factories are busy, but shoppers are pickier, watching value closely. Confidence is coming back slowly," he added.
Goh said policymakers were likely to focus more on direct support for households, including fiscal transfers, stronger social safety nets and measures to stabilize the property market, rather than relying on infrastructure spending.
Investors are now looking to the expected late-July Politburo meeting for clues on fresh stimulus that could shape economic policy for the rest of the year.
"The economic growth slowed in Q2, but I am not sure it would push the government to change policy stance significantly in the coming months," Reuters quoted Zhiwei Zhang, chief economist at Pinpoint Asset Management, as saying.
"The government is still on track to deliver growth in line with the official target... The Politburo meeting in the last week of July will shed light on the policymakers' guidance."
China has so far weathered the latest oil shock due to resilient energy stockpiles and state-controlled fuel prices, but a prolonged rise in energy costs could squeeze factory margins, weaken household purchasing power and complicate efforts to sustain growth.
A Reuters poll forecasts China's economy will expand 4.6% in 2026, slowing from 5% last year, before easing further to 4.4% in 2027.
