China’s Growth Slows as Policymakers Prepare More Support

China’s economic growth slowed more than expected in the second quarter, increasing pressure on policymakers to strengthen domestic demand during the remainder of the year.

Gross domestic product expanded 4.3% from a year earlier, down from 5.0% in the first quarter. The result also fell below the government’s 4.5% to 5.0% target range.

The headline figure reflects a widening gap inside the economy. Exports and industrial production have remained relatively resilient, but consumer spending and investment continue to lack momentum.

This imbalance presents a challenge for Beijing. Strong manufacturing output can support overall growth, but it becomes harder to sustain when households and private businesses are cautious.

Fiscal policy likely to lead the response

Standard Chartered economists Hunter Chan and Shuang Ding expect the government to focus first on carrying out measures that have already been announced.

Faster budget execution could direct more money toward infrastructure during the second half of the year. This would support construction, industrial demand and employment without requiring an immediate launch of a much larger stimulus programme.

The economists believe China still has enough fiscal room to accelerate spending. Additional support could be considered later if existing policies fail to stabilise growth.

Monetary policy is also expected to remain accommodative. Easier financial conditions can reduce borrowing costs and help credit growth, although lower rates alone may not be enough if households and businesses remain unwilling to spend.

Domestic demand is the key test

The central issue for the second half of 2026 is whether policy support can translate into stronger consumption and private investment.

Export demand can be affected by global growth and trade restrictions, while continued reliance on industrial production may add to concerns about excess capacity. A more balanced recovery would require households to feel confident enough to increase spending and companies to see sufficient demand to expand.

Standard Chartered maintained its full-year growth forecast at 4.6%. That estimate assumes that the government speeds up budget implementation and keeps monetary settings supportive.

The forecast suggests that China can still deliver moderate growth despite the second-quarter slowdown. It also depends on effective policy execution. Delays in fiscal spending or further weakness in consumption would increase the risk that annual growth falls short.

For global markets, China’s policy response will matter beyond its borders. Stronger infrastructure spending could support demand for commodities and currencies linked to Chinese trade. Continued domestic weakness would have the opposite effect, particularly for economies that rely heavily on Chinese consumption and investment.

Source context: Standard Chartered analysis by Hunter Chan and Shuang Ding, reported by FXStreet on July 15, 2026.