The National Bureau of Statistics released the performance of the national economy for the first half of the year on July 15th. Preliminary calculations show that the Gross Domestic Product for the first half reached 69.5704 trillion yuan, representing a year-on-year growth of 4.7% at constant prices. By quarter, GDP grew 5.0% year-on-year in the first quarter and 4.3% in the second quarter. On a quarter-on-quarter basis, GDP grew 0.9% in the second quarter.
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 5.3%, while retail sales of goods grew 1.1%. Total retail sales of consumer goods reached 24.8722 trillion yuan, up 1.3% year-on-year. In June alone, total retail sales of consumer goods amounted to 4.2691 trillion yuan, rising 1.0% year-on-year compared to a 0.6% decline in May, and grew 0.38% month-on-month.
National fixed asset investment, excluding rural households, totaled 22.637 trillion yuan in the first half, down 5.7% year-on-year. Excluding real estate development, fixed asset investment fell 2.7%. By sector, infrastructure investment decreased 2.4% year-on-year, manufacturing investment fell 1.2%, and real estate development investment dropped 18.0%. In June, fixed asset investment, excluding rural households, declined 0.37% month-on-month.
Mao Shengyong, Deputy Commissioner of the National Bureau of Statistics, stated at a press conference held by the State Council Information Office that the economy operated within a reasonable range in the first half, with new growth drivers expanding rapidly. However, numerous external instabilities and uncertainties persist, the domestic contradiction of strong supply versus weak demand is prominent, and the foundation for economic improvement still requires consolidation.
In the next phase, efforts should be intensified on counter-cyclical and cross-cyclical adjustments. There should be a continuous push to expand domestic demand and optimize supply, improve incremental quality and revitalize existing stock, focus on building a strong domestic market, accelerate the cultivation and expansion of new growth drivers, and redouble efforts to stabilize employment, enterprises, markets, and expectations. This will promote effective qualitative improvement and reasonable quantitative growth in the economy.
Multiple Factors Contribute to Fluctuations in Second Quarter Economic Growth
The second quarter's GDP growth of 4.3% was 0.7 percentage points lower than the first quarter, influenced by multiple factors. Short-term and external factors were significant contributors, according to Mao Shengyong. For instance, petrochemical-related industries were affected by some external impacts, and coal production was influenced by domestic short-term factors, while other industries performed normally. The fundamental trend of stable economic operation moving towards new and superior quality remains unchanged.
Analysis suggests that energy supply shocks, the waning effect of front-loaded policies, coupled with inherently weak domestic demand, led to a slowdown in economic momentum in the second quarter. The improvement in economic momentum in the first quarter was primarily supported by external demand and front-loaded policies. In the second quarter, while external demand maintained a relatively high growth rate partly driven by AI, the negative supply impact from energy shocks due to Middle East conflicts and domestic coal mine safety inspections, along with the fading effect of front-loaded policies, combined with persistently weak endogenous demand amid ongoing real estate adjustments, resulted in a slower year-on-year GDP growth for the quarter.
It is pointed out that the high growth in export value in the second quarter was mainly driven by significant price increases in major export products like chips, while the growth in export volume was relatively slower. The pull on domestic industrial production and GDP was weaker than the export value growth rate suggests.
However, Mao Shengyong also noted that indicators reflecting new growth drivers performed relatively well in the second quarter, indicating the continued momentum of new drivers growing stronger. For example, equipment manufacturing above designated size grew 9.7% in Q2, accelerating by 0.8 percentage points from Q1. High-tech manufacturing value-added grew 14%, accelerating by 1.5 percentage points from Q1. The electronics industry grew 14.8% in the first half, with Q2 growth at 16.1%, accelerating by 2.5 percentage points from Q1.
Overall Slowing of Retail Sales Growth in First Half, Rebound in June
In June, total retail sales of consumer goods grew 1.0% year-on-year, compared to a 0.6% decline in May. By consumption type, retail sales of goods grew 0.9% in June versus a 0.7% decline in May, while catering revenue grew 1.2% year-on-year, accelerating by 0.6 percentage points from the previous value.
In the first half, total retail sales of consumer goods grew 1.3% year-on-year, lower than the full-year 2025 figure of 3.7%. Analysis suggests the positive turn in June's retail sales growth, which exceeded market expectations, is likely related to factors like the "618" e-commerce promotion and a lower base due to the timing of the Dragon Boat Festival holiday.
Looking at retail sales of goods by enterprises above designated size, compared to the previous month, the year-on-year declines for categories like sports and recreational goods, household appliances and audio-video equipment, and furniture narrowed in June to -2.2%, -8.7%, and -6.6% respectively. Growth rates for cultural and office goods and communication equipment accelerated to 12.7% and 16.5% respectively. It is noted these goods fall within the subsidy scope of the trade-in policy. Last June, the suspension of national subsidies in many places due to fund disbursement progress led to a significant slowdown in retail sales growth for these goods, creating a lower year-on-year base for this June.
Additionally, retail sales of automobiles in June fell 16.1% year-on-year, the same decline as the previous month, indicating continued significant drag from auto retail on overall retail sales growth.
Overall in the first half, the growth rate of total retail sales of consumer goods was lower than the full year 2025. Within this, retail sales of goods grew 1.1% and catering revenue grew 2.8%, both also lower than the full year 2025. Furthermore, retail sales of services grew 5.3% in the first half, lower than the 5.5% for full year 2025.
Analysis suggests that overall, since the beginning of this year, the growth rate of goods retail has declined significantly, and service consumption growth has also moderated, reinforcing the macroeconomic characteristics of "strong supply, weak demand" and "strong external, weak internal." The reasons include: first, the large-scale implementation of the trade-in policy starting in the second half of 2024 strongly boosted sales of covered consumer goods in 2025. In 2026, due to reduced trade-in subsidy amounts, a higher base from the previous year, and longer repurchase cycles for durable goods, the growth rate of retail sales for goods within the trade-in subsidy scope has slowed significantly. Second, the persistent weakness in the real estate market this year, besides directly dragging down housing-related consumption, has also dampened consumer confidence.
Fixed Asset Investment Growth Declines, but Notable Growth in New Energy, AI, and Integrated Circuits
In the first half, national fixed asset investment, excluding rural households, fell 5.7% year-on-year, with the decline widening by 1.6 percentage points compared to January-May. Excluding real estate development, fixed asset investment fell 2.7%. In June, fixed asset investment, excluding rural households, declined 0.37% month-on-month.
By sector, infrastructure investment fell 2.4% year-on-year, manufacturing investment fell 1.2%, and real estate development investment dropped 18.0%, with growth rates declining across all three major investment sectors.
Infrastructure investment fell 2.4% year-on-year in the first half. Analysis suggests the overall weakening of infrastructure investment is mainly due to a time lag between project and fund alignment following front-loaded efforts in the first quarter. Other analysis points out that fiscal expenditure and special bond issuance progress slowed in the second quarter, policy-based financial tools have not yet taken effect, and while there was an increased demand for broader fiscal acceleration by the end of Q2, there is a transmission lag to the investment side. Additionally, local governments' short-term investment inclination still favors the upper stroke of a "K-shape," with industrial projects being more concentrated than infrastructure projects. Furthermore, weather conditions like high temperatures in the north and heavy rain in the south this year have affected outdoor construction, significantly slowing work progress at sites.
The decline in manufacturing investment widened. Analysis attributes this to several factors: first, some mid- and downstream enterprises face pressures from rising raw material costs, insufficient terminal demand, and poor price transmission, leading to weaker profit and cash flow expectations and more cautious capital expenditure; second, diminishing returns from equipment renewal benefits, as some renewal demand was released ahead of schedule after concentrated investment in 2025; third, insufficient capacity utilization.
Mao Shengyong noted that while fixed asset investment growth was negative in the first half, it's important to note the investment scale remains substantial. As China's development stage changes, particularly transitioning from past high-speed growth to a new stage of high-quality development, observing the structure, quality, and efficiency of fixed asset investment becomes more important and worthy of attention. He highlighted the continued increase in investment in emerging industries, with notable growth in areas like new energy, artificial intelligence, and integrated circuits. In the first half, investment in high-tech industries grew 4.6% year-on-year, with investment in integrated circuit manufacturing, electronic specialty materials manufacturing, and lithium-ion battery manufacturing growing 8.8%, 10%, and 24.4% respectively.
Outlook for Consumption and Investment Trends in the Next Phase
Looking ahead to the overall economic trend in the next phase, analysis suggests that driven by moderate pro-growth policies boosting domestic demand and the fading of some short-term influencing factors, third-quarter GDP growth is expected to recover to around 4.6%, with further acceleration likely in the fourth quarter. The full-year economy is projected to show a "V-shaped" trajectory. Within this, new growth drivers represented by high-tech manufacturing are expected to maintain a relatively fast development momentum in the second half, while older drivers represented by real estate will continue to face pressure, and the "K-shaped" divergence in the economy will persist.
Regarding consumption, analysis indicates that, considering the 15th Five-Year Plan for consumption, the focus of consumption promotion policies is shifting from product subsidies and short-term stimulus towards improving residents' consumption capacity, enhancing social security, expanding service consumption supply, and optimizing consumption scenarios. Overall, consumption has stabilized at a low level in the short term, but the formation of a sustained recovery still depends on simultaneous improvements in employment income, household cash flow, and the wealth effect.
For the remainder of the year, analysis suggests that as the impact of temporary disruptive factors weakens, the growth rate of total retail sales may gradually recover in the second half.
In the infrastructure investment sector, analysis expects that with the acceleration of local special bond issuance and the anticipated implementation of new policy-based financial tools, eased funding constraints will promote faster formation of physical工作量, leading to a stabilization and rebound in infrastructure investment in the third quarter.
Regarding manufacturing investment, analysis believes that driven by factors such as the expected continued relatively fast growth in high-tech manufacturing investment in the second half, manufacturing investment will receive some support.
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