In the first half of 2026, Xi'an's economy presented a stark contrast. On one hand, foreign trade data was booming. According to the Xi'an Bureau of Statistics, the city's total import and export value surged by 96.2% year-on-year, the fastest growth among China's top 20 foreign trade cities. On the other hand, the city's gross domestic product (GDP) growth continued to slow. In the first half of the year, Xi'an's real GDP growth was only 1.1%, ranking second-to-last among 29 cities with a trillion-yuan economy.
Within Shaanxi Province, Xi'an accounted for about 37% of the province's total economic output with a GDP of 650.914 billion yuan. However, its 1.1% growth rate was 2.7 percentage points lower than the provincial average. Among the 11 cities and districts in the province, Xi'an and the Yangling Demonstration Zone were the only two regions where growth lagged behind the provincial level. Furthermore, for the first time, Xi'an's GDP increment in the first half of the year was overtaken by the resource-based city of Yulin. The question arises: why did the explosive growth in foreign trade fail to drive Xi'an's economy forward?
Pillars Under Pressure
The slow GDP growth in the first half of the year was not caused by a single factor. Pressure was simultaneously felt across investment, consumption, and industry. Industry is the bedrock of Xi'an's economy. In the first half of the year, the added value of industries above a designated size decreased by 0.9% year-on-year. Looking at the monthly trend, from January to February, this figure fell by 7.5%, followed by a 4.7% decline in the first quarter, a narrowing to 4.2% in the January-April period, and a 3.3% drop in the first five months. Although the decline narrowed month by month, the industrial sector as a whole remained in negative territory.
Zeng Zhaoning, a professor at the School of Economics and Management of Xi'an Shiyou University, believes that as an industrial city, Xi'an's weak industrial performance inevitably impacts its GDP. Looking at specific sectors, the automobile industry, one of Xi'an's trillion-yuan pillar industries, saw the added value of automobile manufacturing above a designated size decline by 6.3% from January to June. Xi'an is the core of Shaanxi's automobile industry, bearing the brunt of the industry's downturn. This pressure is highly concentrated on a single company, Byd Company Limited.
Data from the Shaanxi Provincial Automobile Industry Association shows that in 2025, Shaanxi's automobile production reached 1.725 million vehicles, ranking eighth in the country. Xi'an Byd Company Limited produced 1.003 million vehicles, contributing nearly 60% of the total. In the first half of 2026, according to the National Bureau of Statistics, Shaanxi's automobile production plummeted to 493,000 vehicles, a 47.7% year-on-year decline, dropping its national ranking from eighth to fourteenth. Li Dong, Dean of the Xi'an Tongji Regional Planning and Research Institute, analyzed three main reasons for the sharp decline in Shaanxi's automobile production: the Ministry of Industry and Information Technology promoted industry governance to curb "involution" and guide companies to voluntarily limit production to address overcapacity; Byd Company Limited's Caotang base underwent a production line switch, with old models being phased out and new models not yet reaching full capacity; and Byd Company Limited diverted some popular models to its plants in Zhengzhou and overseas, reducing local production in Xi'an.
Shaanxi's manufacturing sector is heavily reliant on the automobile industry, which in turn is highly dependent on Byd Company Limited. Once this main engine "stalls," the economy risks losing momentum. A city's development that is overly tied to a specific industry or company is vulnerable to policy adjustments, industry cycles, and corporate capacity planning. This high-dependency model on a single enterprise is unstable, carries significant risks, and urgently needs adjustment. On June 26, Shaanxi Provincial Party Secretary Zhao Yide held talks with Wang Chuanfu, Chairman of Byd Company Limited, hoping the company would increase its layout in vehicle production, high-end manufacturing, and technology R&D to synergistically create new advantages in the new energy vehicle industry.
Xi'an's 2026 government work report stated that the growth rate of fixed asset investment (FAI) should strive to be no less than the provincial level. However, in the first half of the year, Xi'an's FAI decreased by 29.9% year-on-year, below the provincial average. Specifically, industrial investment fell by 32.1%, real estate development investment by 25.0%, private investment by 19.1%, and infrastructure investment by 30.8%. Zeng Zhaoning analyzed that the sharp decline in industrial investment was partly due to weakening corporate expectations in the macro environment, leading to a lack of confidence among market players and reluctance to expand reproduction. Additionally, the results of investment attraction were not as expected, with fewer new projects landing and insufficient effective incremental support.
Li Dong added that major infrastructure projects that had driven Xi'an's high FAI growth in recent years, such as the Xi'an East Railway Station (the starting point of the Xi'an-Shiyan High-Speed Railway) and the third phase of the metro, were completed in the first half of this year. The concentrated conclusion of a batch of national-level mega-projects, without timely replacement by new major investment projects, caused a "cliff-like" decline in FAI. Xi'an's economy is primarily driven by investment. When investment declines, it becomes difficult to stabilize the overall economic situation. While investment was "bleeding," the consumption side also continued to weaken. In the first half of the year, Xi'an's total retail sales of consumer goods fell by 3.6% year-on-year, the only decline among all cities and districts in Shaanxi Province.
Zeng Zhaoning believes that weak consumption is not unique to Xi'an but is a nationwide phenomenon. The root cause lies in the slowdown of residents' income growth, which restricts their spending power. At the same time, concerns about social security have pushed up household savings rates. Furthermore, existing consumption stimulus policies have limited effectiveness, treating symptoms rather than root causes. Xi'an has a permanent population of over 10 million, a high number of universities and students, outstanding cultural and tourism resources, and consistently ranks among the top tier of cities for holiday tourist numbers. However, based on the first-half consumption data, the large flow of tourists has not been effectively converted into physical consumption. The advantage of this traffic has not yet been fully realized as economic growth.
Impressive on Paper
Amidst the pressure on multiple economic indicators, foreign trade is one of the few bright spots for Xi'an. Zeng Zhaoning argues that with both investment and consumption weakening, relying solely on exports is unlikely to support the overall economy. Driven by the surge in global demand for AI computing power, the country's integrated circuit exports have grown significantly this year. Leveraging the presence of two major companies, Samsung and Micron Technology, Xi'an has capitalized on the dividends from this AI industry cycle. According to the Xi'an Bureau of Statistics, in the first half of the year, Xi'an's total import and export value grew by 96.2% year-on-year. Within this, export value increased by 1.2 times, high-tech product exports by 2.2 times, and electromechanical product exports by 1.4 times.
From a trade structure perspective, processing trade remains the engine of Xi'an's foreign trade growth. According to data released by the Xi'an Bureau of Statistics for the January-May period, processing trade accounted for about 70% of the city's total import and export value, while foreign-invested enterprises contributed 76.4%. This means Xi'an's foreign trade advantage is highly dependent on foreign capital and the processing trade chain. Over the past decade or so, with the establishment of Samsung and Micron Technology, Xi'an has seized the early opportunity in the semiconductor industry. Customs data shows that by 2025, Micron Technology Xi'an's import and export volume had ranked first in Shaanxi for 19 consecutive years. Since Samsung settled in the Xi'an Gaoxin Comprehensive Bonded Zone in 2012, its Xi'an plant has shouldered about 40% of the global NAND flash memory production capacity.
Li Dong noted that both Samsung and Micron Technology are typical examples of the "two ends outside" processing trade model: core design and R&D are all kept at their overseas headquarters, while Xi'an only undertakes some processing and packaging steps. According to the profit distribution logic of the "smiling curve," Xi'an is precisely in the lowest value-added and least profitable manufacturing and processing link. Although the export data is impressive, the actual contribution to Xi'an's local GDP is very limited. In essence, Xi'an is more like a semiconductor "production workshop": it imports large quantities of raw materials, processes them, and then exports them on a large scale, inflating the total foreign trade volume, but the local area mainly earns processing fees. Li Dong analyzed that when Xi'an introduced Samsung in 2012, the original intention was to cultivate a local semiconductor industry ecosystem through the technology spillover from the leading company. However, this goal has not been achieved since the project landed.
On one hand, the Samsung plant is located within the comprehensive bonded zone, creating both physical and institutional isolation. It is difficult for local universities, research institutions, and semiconductor-related enterprises in Xi'an to access it. Core processes and product architectures are not open to the outside, making the Samsung plant nearly a closed-loop "industrial enclave." On the other hand, many of Samsung's supporting companies are extensions of its original South Korean supply chain, forming a closed supporting circle for South Korean capital. Local enterprises are unable to enter the core supply chain, thus having a very limited driving effect on the regional economy. In contrast, Hefei, which also benefits from the semiconductor industry, has taken a different development path. Hefei's GDP grew by 6.8% in the first half of the year, ranking first among trillion-yuan cities. Li Dong believes that Hefei's ChangXin Memory Technologies has followed a path of local cultivation and independent control, with a deeply localized industrial chain that builds a complete industrial ecosystem from scratch. This is a highly valuable reference model for Xi'an.
Breaking Through in Industry
Overall, the common root cause behind the decline in consumption and investment, as well as the stagnation of pillar industries, is that Xi'an's industry is not strong enough and its industrial system is not diversified enough. The low proportion of the secondary sector and the over-reliance on a single large enterprise leave the city with little buffer against cyclical fluctuations. Shan Yuanzhuang, Dean of the Xi'an Chaohua Management Science Research Institute, mentioned that after 2010, many cities pursued a target of the tertiary sector accounting for 70% of the economy. Xi'an's industrial share dropped from nearly 50% in the past to around 28%. Industry is the "backbone" of the economy. When industry is weakened, the economy is prone to developing a "soft bone disease." In the first half of 2026, Xi'an's secondary sector accounted for only 25.5% of its GDP. Furthermore, Xi'an lacks a sufficient number of leading enterprises, as well as ecosystem and platform-based companies. The automobile industry is heavily bet on Byd Company Limited, and the electronics information industry on Samsung. This high dependence on a single leading company means the industrial system lacks resilience against risks.
To break the deadlock, the focus must also be on industry. Shan Yuanzhuang believes that Xi'an needs to adjust its industrial structure and place high importance on new intelligent industrialization. It should encourage leading companies like Shaanxi Automobile Group and Byd Company Limited to release non-core production links, attract a cluster of private supporting companies to gather nearby, extend the industrial chain, and create a genuine industrial cluster. Zeng Zhaoning stated that the current competition is no longer between individual companies but between industrial clusters. Relying on just one or two leading companies is not enough to support the overall economy. It is necessary to cultivate and strengthen upstream and downstream enterprises, deepen the supporting system, and increase the local supporting rate. Li Dong believes that to turn the economic situation around, efforts must be made on both the existing stock and the incremental front.
On the stock side, Xi'an should stabilize the fundamentals of its five trillion-yuan manufacturing clusters, strengthen the cluster ecosystem through a "chain leader + chain chief" mechanism, and avoid drastic ups and downs. It should also increase investment in industrial technology transformation to promote the upgrading of traditional industries. "On the incremental side, Xi'an needs to cultivate a second growth curve representing new productive forces as soon as possible. Otherwise, its position among the new first-tier cities will face significant pressure," Li Dong said. Li Dong also specifically mentioned that if Xi'an can secure national funds in the second half of the year and reverse the decline in investment, the overall economic situation would improve significantly. Currently, Shaanxi Province and Xi'an City are seeking funds from higher levels through policy channels such as the "Two Major Initiatives" and the "Five Networks." With private investment declining and local fiscal resources tight, securing national-level funds is almost the only path for Xi'an to boost investment. As long as investment volume increases, economic pressure can be alleviated.
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