China's economy grows at one of its lowest rates on record

China's economy expanded by a weaker-than-expected 4.3% in the second quarter, marking one of its lowest quarterly growth rates since official figures began in the early 1990s. This figure falls below the government's target range of 4.5% to 5% and is only slightly higher than the rate seen during the final quarter of 2022, when the country was under strict COVID-19 restrictions.

The latest economic data presents a mixed picture, contrasting with recent official customs figures that showed a significant 27% increase in exports for June. This divergence underscores a growing dependency on international sales while domestic consumer demand and investment struggle to gain momentum. Although monthly car exports surpassed one million for the first time, domestic vehicle sales plummeted by over 16%. Retail sales, excluding cars, saw a modest 3% increase, but economists stress the need for more sustained consumption growth.

Analysts are closely monitoring whether the Chinese Communist Party will signal new stimulus measures during an upcoming meeting of top officials. Economists argue that more substantial interventions are crucial to boost consumer spending and rebalance the economy away from its heavy reliance on exports, which constitute approximately 20% of the gross domestic product.

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The intensity and magnitude of this cumulative negative growth are unprecedented.

Leading Chinese economist Li Daokui noted that local governments, traditionally engines of growth, have become bottlenecks. Fixed-asset investment, a key driver historically managed by provincial authorities, declined by over 4% between January and May. Such contractions in fixed-asset investment are rare, having occurred only twice before in China's history (1961 and 1967). Li described the current negative growth as "unprecedented" in its intensity and magnitude, warning that alongside unemployment, it demands utmost attention to avoid jeopardizing China's economic goals.

Adding to economic concerns, Beijing remains wary of a potential resumption of US tariffs when the current truce expires in November, which could impact Chinese exporters. Global economic strain from the US-Israel war on Iran also poses a risk to international demand for Chinese goods, although China has thus far weathered the conflict's immediate economic shock relatively well.

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If [these issues] are not addressed, all of China’s economic goals and tasks will face difficulties.