Data released by China’s National Bureau of Statistics showed that China’s gross domestic product (GDP) grew 4.3 per cent year-on-year in the second quarter of this year, down from 5 per cent in the first quarter and marking the slowest growth rate in three years.
On a quarterly basis, China’s economy grew by just 0.9 per cent in the second quarter, indicating that the momentum of the economic recovery is weakening. The property market remains sluggish, with development activity contracting sharply. Job opportunities outside the manufacturing sector have also declined, while stagnant wage growth has made many people increasingly concerned about the economic outlook, affecting consumer spending.
At the same time, China’s export performance remained strong, with its trade surplus exceeding US$125 billion in June, the second-highest on record. Car exports became an important driver of China’s export growth. China’s car exports exceeded one million vehicles for the first time in June, up 27 per cent year-on-year, while electric and hybrid vehicles continued to expand their influence in the European market. Despite the European Union imposing additional tariffs on Chinese electric vehicles in 2024, Chinese brands have continued to rapidly capture market share from traditional carmakers, placing greater competitive pressure on the European automotive industry.
In addition, deflationary pressures that had persisted for years showed signs of improvement in the second quarter, with the GDP deflator finally turning positive. However, rising oil prices and the property crisis continue to place pressure on households and the economy.
Faced with slowing growth, the Chinese government is seeking to stimulate consumption and stabilise employment, while planning to increase household incomes and the share of consumption in the economy. Analysts expect authorities may introduce new economic support measures later.
Commentary:
On the one hand, China’s exports of semiconductors, electric vehicles and cars remain strong, reflecting the considerable competitiveness of its manufacturing sector. On the other hand, a sluggish property market, weak consumption and employment pressures mean many ordinary households have yet to truly feel the benefits of economic growth. In other words, China’s economy can still “produce more and export more”, but domestic consumers may not have sufficient confidence to spend.
The rapid growth of car exports has indeed provided important support for the economy. However, if export growth is driven largely by weak domestic demand, companies may need to push more products into overseas markets, potentially creating new trade tensions in the long term.
Therefore, the real challenge facing China’s economy is not simply how to maintain export growth, but how to translate economic growth more directly into household incomes and consumer confidence. Otherwise, an economic model reliant primarily on exports may struggle to fully fill the gap left by weak domestic demand and the downturn in the property market.