China's second-quarter GDP growth slowed to 4.3% year-on-year, down from 5.0% in the first quarter, marking the weakest pace since late 2022 and falling short of both market (4.5%) and ING (4.6%) forecasts [1]. Despite this slowdown, growth averaged 4.7% in the first half of the year, remaining within the official target range of 4.5–5.0% [1]. ING’s Chief Economist for Greater China, Lynn Song, highlighted that underlying domestic indicators are increasingly weak, with fixed-asset investment slipping further into negative territory year-on-year, retail sales barely above zero, and net exports negative despite strong headline export growth due to a surge in imports [1]. Inflation was also higher in the second quarter, reducing the positive impact from the GDP deflator [1].
The sharp weakening in monthly indicators, which was not evident in the first quarter's puzzling 5.0% GDP print, became much clearer in the second quarter release [1]. Song notes that while monthly indicators do not map directly into GDP, the underlying economic pulse is unmistakably weak [1]. The contribution to GDP data is expected to be released in the coming days, which will provide further clarity on the sources of growth [1].
Looking ahead, ING expects China to achieve its full-year growth target of 4.5–5.0%, but risks to the 4.7% forecast are balanced to the downside [1]. The timing and scale of policy support to arrest the downward momentum remain uncertain, and without such support, growth is likely to continue declining [1]. As this is the first year of the 15th Five-Year period, policymakers are expected to avoid coming in at the low end of the target band, raising the stakes for the upcoming Politburo meeting [1].
CONCLUSION
China's Q2 GDP slowdown has intensified calls for fiscal and monetary policy support, with key domestic indicators showing persistent weakness. While ING expects the full-year growth target to be met, downside risks remain, and market participants are closely watching for policy signals from the upcoming Politburo meeting.