China's economy posted 4.7% growth in the first half, while pressure for a slowdown is mounting in the second half. China's state media called the first-half growth "growth in line with expectations" but acknowledged structural problems such as weak domestic demand and sluggish investment. It also emphasized the possibility of additional policy responses in the second half.
China's state-run Global Times said in a commentary on the 24th that the 4.7% growth rate was "growth that aligns with expectations, has substance, shows strong resilience, and has room to expand in the latter half." The Chinese government's publicly announced annual growth target for this year is 4.5% to 5%. With the first-half growth of 4.7% falling within the target range, the start toward achieving the annual goal was smooth, the Global Times said.
It also stressed technological innovation and growth in new industries. The Global Times said new industries directly accounted for more than 40% of economic growth in the first half, and registrations of artificial intelligence (AI)-related patents rose 34.8% from a year earlier. The share of clean energy in power generation exceeded 36%, and lithium battery output increased 39%, it said.
But it is hard to be optimistic about the economy in the second half. The Global Times noted that "the contradiction of oversupply and insufficient demand remains prominent," and cited the failure of investment growth to recover as a major burden. It also said that in the process of resolving local government liability and real estate and risks at small and midsize financial institutions, the economy will have to pay a certain short-term expense for growth.
In fact, signs of a slowdown became clearer in July. Industrial production growth rate in July was 4.5% from a year earlier, down from 5.3% in June, and retail sales growth was just 0.6%. Fixed assets investment in January to July fell 6.7% from a year earlier. Analysts say persistent weak domestic demand and a slumping property market are squeezing investment and consumption at the same time.
China's government is also moving to respond with policies as it recognizes second-half pressures. Premier Li Qiang on the 17th identified insufficient domestic demand, industry headwinds, and rising external uncertainty as key problems, and called for expanding domestic demand, boosting jobs and incomes, and supporting investment in new industries. He said the government would use existing policies and, if necessary, roll out new measures in a timely manner.
Support through fiscal policy was also signaled. The Ministry of Finance said it is preparing additional fiscal and financial support tailored to second-half economic conditions and plans to raise the share of fiscal spending for households and consumption. It also laid out plans to expand interest subsidies to reduce loan interest burdens for small business owners and consumers. However, rather than unveiling a large new stimulus all at once, the emphasis is on accelerating implementation of already budgeted infrastructure projects. The Global Times likewise emphasized second-half policy leeway, saying, "Practical and effective additional policies can be introduced as the economic situation evolves."
However, China is likely to continue selective policy responses focused on domestic demand and quality growth, rather than relying on large-scale stimulus as in the past. The Global Times also stressed that expanding investment should not merely aim to lift the investment growth rate, but should channel resources into areas needed for the future and people's livelihoods, such as upgrading manufacturing and urban infrastructure.