China's mid-year economic report has been released, showing robust growth in new economic drivers and a positive shift in consumption growth.
Data released by the National Bureau of Statistics on July 15th indicates that the gross domestic product for the first half of the year reached 69.5704 trillion yuan. Calculated at constant prices, this represents a year-on-year increase of 4.7%. On a quarterly basis, growth was 5.0% in the first quarter and 4.3% in the second quarter.
"The growth rate aligns with the annual economic growth target," stated Mao Shengyong, Deputy Commissioner of the National Bureau of Statistics, at a press conference held by the State Council Information Office on the 15th. He noted that the national economy operated within a reasonable range in the first half, with the cultivation and expansion of new quality productive forces and high-quality development progressing towards new and superior directions. New growth drivers contributed over 40% to the economic growth in the first half. At the same time, there remain numerous external instabilities and uncertainties, and the domestic contradiction of strong supply versus weak demand is prominent, meaning the foundation for economic improvement still needs consolidation.
The national Producer Price Index (PPI) for the second quarter rose by 3.6%, marking the first time the quarterly PPI growth rate has turned positive since the fourth quarter of 2022. In response to a question from a Yicai reporter at the press conference, Wang Guanhua, the NBS spokesperson, stated that the next stage still has solid support for stable PPI operation. Although there are many external uncertainties and unpredictable factors, and the trend of international commodity prices remains uncertain, China's comprehensive industrial categories, strong industrial production capacity, diversified energy import channels, and continuously improving resilience of industrial and supply chains mean that external inflationary impacts are generally controllable.
New Growth Drivers Provide Key Support
When discussing the prominent highlights of the first-half economic performance, Mao Shengyong summarized them as: stability, resilience, innovation, and optimization.
He indicated that compared with the first half of last year, the GDP increment was 3.6 trillion yuan, which is the largest increment for the same period in the past five years. For an economy of China's scale, achieving 4.7% growth is commendable. Although the growth rate in the second quarter declined somewhat, the fundamental trend of stable economic operation and progress towards innovation and optimization has not changed.
Key livelihood indicators such as employment and income showed positive improvement. The average surveyed urban unemployment rate for the first half was 5.2%, with the rate in June at 5.0%, a decrease of 0.1 percentage points from the previous month. In the first half, the national per capita disposable income reached 22,981 yuan, a nominal year-on-year increase of 5.2%, and a real increase of 4.2% after adjusting for price factors.
From the first-half data, the structural highlights of the Chinese economy are very prominent, with steady acceleration towards innovation and optimization. The pace of transition between old and new growth drivers is accelerating, with new drivers continuously growing and increasingly shouldering the burden of the Chinese economy.
Data shows that in the first half, the value-added of high-tech manufacturing industries above a designated size increased by 13.3% year-on-year. Within this, the value-added of the aerospace and equipment manufacturing industry and the electronic and communication equipment industry grew by 16.3% and 17% respectively. Industries related to artificial intelligence, such as integrated circuit manufacturing and intelligent vehicle equipment manufacturing, maintained high growth rates exceeding 30%. The pace of green transformation accelerated, with the retail penetration rate of new energy vehicles exceeding 60% for three consecutive months in the first half, driving a 39.3% increase in lithium-ion battery production.
Mao Shengyong stated that preliminary calculations indicate that in the first half of this year, new growth drivers represented by high-end manufacturing, the digital economy, and modern services contributed over 40% to economic growth. The characteristics of economic progress towards innovation and optimization are very distinct, and the overall development trend is accelerating.
The quality and efficiency of economic development are also optimizing and improving. Looking at corporate profits and expectations, from January to May, the profits of industrial enterprises above a designated size increased by 18.8% year-on-year, maintaining double-digit growth since the beginning of the year. Industries related to new drivers, such as electronics and non-ferrous metals, showed particularly better profitability. In June, the Manufacturing Purchasing Managers' Index (PMI) was 50.3%, and the Services Business Activity Index was 50.4%, up 0.3 and 0.1 percentage points respectively from the previous month, indicating overall stable market expectations.
Mao Shengyong said that considering the above aspects, given the current complex and volatile international situation, the overall slowdown in global economic growth, a deceleration in international trade, and significantly rising inflationary pressures in most countries, China's economy maintained a 4.7% growth rate in the first half of this year while prices rose moderately, employment remained generally stable, and the balance of payments improved, especially with the accelerated growth of new drivers in emerging fields. China's economy has achieved effective qualitative enhancement and reasonable quantitative growth.
Pang Ming, a member of the China Chief Economist Forum, analyzed that the first-half economic data reflects the current economy shifting gears from a "speed-oriented" to a "quality-oriented" model, and highlights the deep structural transformation of growth drivers amid a complex external environment and adjustments in the pace of domestic demand recovery. The first-half GDP growth rate falls within the 4.5% to 5% target range set at the beginning of the year. Considering the improved effectiveness of macro policies, the gradual recovery of endogenous momentum, and the base effect in the second half of 2025, GDP growth in the third and fourth quarters is expected to rise.
China Galaxy Securities pointed out that the economy is expected to remain stable in the second half of 2026, with the full-year economic growth rate operating within the range of 4.6% to 4.7%. The second quarter may be the low point for the year's economy.
Policies to Boost Consumption Expected to Intensify
The shift of consumption growth from negative to positive in June became a major highlight in economic performance.
In the first half, the total retail sales of consumer goods and services increased by 2.7% year-on-year. Within this, retail sales of services grew by 5.3%, and retail sales of goods grew by 1.1%. In June, the total retail sales of consumer goods reached 4.2691 trillion yuan, a year-on-year increase of 1.0%, compared to a 0.6% decrease in the previous month.
Pang Ming stated that the total retail sales of consumer goods showed a slight year-on-year increase in the first half, but structural improvements were evident. Automobile consumption remained weak, but food, daily necessities, and service consumption showed resilience. Particularly, online retail and rural consumption growth led the way, demonstrating the potential of the digital economy and urban-rural integration. The year-on-year recovery in retail sales for the single month of June reflects the effects of fiscal expenditures and consumption-boosting policies at the end of the quarter. The mild recovery in consumption, while not strong enough to form a powerful driving force, played a stabilizing role in the overall economy.
Regarding the consumption trend in the next stage, Mao Shengyong believes that China possesses favorable conditions for expanding and improving consumption. China has a population of 1.4 billion, a large population size, a continuously growing middle-income group, and a per capita GDP approaching that of high-income countries. From a development stage perspective, the consumption structure is in a stage of transformation and upgrading, with rising resident demand for high-quality goods and service consumption such as leisure, culture, and entertainment. With the deepening advancement of a unified national market, the supply of high-quality consumption is increasing, and consumption-boosting policies are taking effect.
Wang Qing, Chief Macro Analyst at Orient Jincheng, analyzed that consumption-boosting policies are expected to be further strengthened in the second half of the year. This includes potential increases in subsidy amounts for trade-in programs, and support for service consumption may shift from the supply side to the demand side. Other policy tools such as birth subsidies and early childhood education subsidies, which help promote household consumption, are also expected to be intensified or innovated.
Structural Highlights in Investment
Regarding investment, in the first half of the year, national fixed asset investment (excluding rural households) reached 22.637 trillion yuan, a year-on-year decrease of 5.7%. Fixed asset investment excluding real estate development decreased by 2.7%. Private investment decreased by 8.5% year-on-year. By sector, infrastructure investment decreased by 2.4% year-on-year, manufacturing investment decreased by 1.2%, and real estate development investment decreased by 18.0%.
Pang Ming analyzed that the year-on-year cumulative decline in fixed asset investment, especially the pronounced decline in tertiary industry investment, indicates that capital investment in the service sector is still adjusting. Regional disparities are prominent, with the Northeast region showing the largest decline and the East also experiencing a downturn, while investment in some new infrastructure and transportation sectors maintained growth. This pattern suggests that traditional investment drivers are weakening, while emerging industries and infrastructure are becoming new support points. The weakness in investment is a major constraint on the current economy, also implying that policies need to increase efforts to stabilize investment.
Looking at detailed data, there are structural highlights in investment. In the first half, investment in high-tech industries increased by 4.6% year-on-year. Investment in integrated circuit manufacturing, electronic specialty material manufacturing, and lithium-ion battery manufacturing grew by 8.8%, 10%, and 24.4% respectively. Since the beginning of this year, planning and construction of the "six networks" have accelerated. In the first half, investment in internet and related services increased by 39.9% year-on-year, investment in information transmission grew by 25.6%, and investment in optical fiber manufacturing grew by 26.5%.
Mao Shengyong emphasized that from the next stage's perspective, there remains broad prospects for expanding effective investment. Currently, China's per capita capital stock is significantly lower than that of developed countries. This gap also implies development potential and space, especially with strong investment demand for the transformation and upgrading of traditional industries and the advancement of emerging and future industries. Adapting to demographic changes, there is also huge investment potential in areas such as services for the elderly and children, primary healthcare, expansion of quality education, and promoting comprehensive rural revitalization.
He mentioned that the project lists for this year's 800 billion yuan investment in "two key areas" and the 200 billion yuan equipment renewal fund have been fully allocated. The construction of the "six networks" is being coordinated and promoted, and special plans for urban renewal, new energy system construction, and high-quality development of industrial internet are being implemented one after another. The coordinated efforts of various policies are conducive to stimulating investment vitality and releasing investment growth potential.
Pang Ming stated that the economy in the second half of the year will continue the trend of "mild recovery and structural differentiation." The key to policy lies in stabilizing investment, expanding domestic demand, and promoting transformation, thereby fostering new quality productive forces to form stronger support. If synergy can be achieved on both the investment and consumption fronts, the annual economy is expected to remain within a reasonable range, accumulating new growth momentum amid structural optimization.
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