According to UOB economist Ho Woei Chen, China's May Purchasing Managers' Indexes (PMIs) indicate a softer outlook for second-quarter 2026 GDP growth, with the manufacturing sector hovering at the expansion threshold but losing momentum due to weaker external demand and cost pressures related to the Middle East. The services sector showed a modest rebound, but domestic demand remains a key vulnerability that requires policy attention [1].
The May PMI data reinforced the slowdown already evident in April's broader macro indicators. UOB expects China's GDP growth to moderate to 4.7% year-on-year in 2Q26, down from 5.0% in 1Q26. The full-year 2026 GDP growth forecast is maintained at 4.7% [1].
Despite the slowdown, UOB anticipates that policy responses will remain calibrated and incremental unless there is further evidence that growth could fall below the official target range of 4.5%-5.0%. The economist notes that while the services sector's rebound offers some offset, the overall outlook remains cautious due to persistent weaknesses in domestic demand [1].
CONCLUSION
China's economic growth is expected to slow in the second quarter of 2026, with GDP growth forecast at 4.7% year-on-year. While policy is likely to remain measured, ongoing vulnerabilities in domestic demand and external pressures suggest a cautious outlook for the remainder of the year.