On July 15th, the National Bureau of Statistics released data showing that GDP grew by 4.7% year-on-year in the first half of the year. Among them, the year-on-year growth rates of GDP in the first and second quarters were 5.0% and 4.3%, respectively. By comparison, the GDP growth rate in the first half of the year fell within the range of the annual GDP growth target (4.5% -5%), laying a good foundation for achieving the annual growth target. However, the GDP growth rate in the second quarter also hit a new low since 2023.

From the perspective of the "three drivers" driving economic growth, the export performance in the first half of the year exceeded market expectations, with a year-on-year increase of 13.4% in total goods exports, of which the export growth rate in June reached 20.8%; Consumption has shown a steady growth trend, with the total retail sales of consumer goods (referred to as "social zero") in the first half of the year increasing by 1.3% year-on-year, lower than last year's full year level (3.7%); Fixed assets investment across the country fluctuated significantly, with the growth rate in the first half of the year declining by 5.7% year on year, and fixed assets investment after deducting real estate development declined by 2.7% year on year.

Liao Bo, Chief Macroeconomic Analyst at Northeast Securities Research Institute, stated that overall, the domestic macroeconomy in the second quarter showed a K-shaped differentiation, mainly manifested as supply being stronger than demand, external demand being better than domestic demand, and the new economy being more prosperous than the old economy.

At the press conference on the day of the data release, Mao Shengyong, Deputy Director of the National Bureau of Statistics, stated that the current international situation is complex and volatile, with an overall slowdown in world economic growth and international trade. Inflation pressure in most countries has significantly increased. In this situation, the Chinese economy maintained a growth rate of 4.7% in the first half of this year, which is commendable. The Chinese economy has achieved effective improvement in quality and reasonable growth in quantity.

Rare and precious 4.7%

This year, especially since the second quarter, there have been new changes in the world economy, and some international institutions predict that the growth rates of major economies will decline to varying degrees in the second quarter. Recently, the International Monetary Fund (IMF) has also lowered its global economic growth forecast for this year to 3.0%, down from 3.5% growth last year.

Against this backdrop, the Chinese economy achieved counter trend growth in the first half of the year. In the first half of this year, the GDP growth reached 3.6 trillion yuan, the largest increase in the same period in nearly five years. The IMF recently raised China's annual economic growth forecast by 0.2 percentage points.

Zhang Liqun, a researcher at the Development Research Center of the State Council, stated that based on the economic growth report, the Chinese economy withstood pressure and continued to maintain steady growth in the first half of the year. The development of new technologies and industries is particularly impressive. It can be said that although the GDP growth rate in the second quarter has declined, the fundamentals of China's stable economic operation and the trend towards a new and better economy have not changed.

As mentioned by Zhang Liqun, according to preliminary calculations by the National Bureau of Statistics, in the first half of this year, new driving forces represented by high-end manufacturing, digital economy, and modern services contributed more than 40% to economic growth, indicating a clear trend towards innovation and optimization.

Specifically, a series of indicators reflecting new momentum performed well in the first half of the year. For example, the equipment manufacturing industry above a certain scale grew by 9.7% in the second quarter, which was 0.8 percentage points faster than the first quarter; The added value of high-tech manufacturing increased by 14%, 1.5 percentage points faster than the first quarter; The electronics industry grew by 14.8% year-on-year in the first half of the year, with a growth rate of 16.1% in the second quarter, 2.5 percentage points faster than the first quarter.

At the press conference, Mao Shengyong stated that in the first half of this year, the pace of China's transition from old to new driving forces has accelerated, and there are many highlights in technology and industrial innovation. Everyone has some intuitive feelings in their daily production and life. For example, when entering a factory workshop, intelligent production lines and industrial robots can be seen everywhere. New energy vehicles, smart home appliances, and other new industries are gradually becoming popular in daily life. These new industries, new products, and new demands continue to build advantages for high-quality development and provide solid support for the stable and positive development of the Chinese economy.

In addition, against the backdrop of multiple shocks to global trade, China's imports and exports also performed well in the first half of the year.

In the first half of the year, the total import and export volume of goods in China increased by 16.9% year-on-year. Among them, exports amounted to 1.47314 trillion yuan, an increase of 13.4%; Imports amounted to 1.07372 trillion yuan, an increase of 22.1%. In June alone, China's export growth rate reached 20.8%.

Zhang Lin, Vice President of Far East Credit Research Institute, stated that the contribution of exports to China's economic growth has reached a historic peak. In the first half of this year, the export value exceeded 2.1 trillion US dollars, setting a new historical high; The export value denominated in RMB was 1.47314 trillion yuan, an increase of 13.4%. AI related products and automobiles contribute to over 60% of export growth, and almost all countries' trading partners have achieved positive growth, reflecting the irreplaceable core position of Chinese manufacturing in the global industrial chain.

Under the high growth of export data in the first half of the year, Zhang Lin also pointed out the need to pay attention to potential fluctuations in export data in the future. He stated that in terms of total volume, with the export scale repeatedly reaching new highs, the contribution rate of export growth has consistently exceeded 30% in the past three years, which is the first time in history. The peak of export and external demand dependence is beneficial for alleviating the fundamental contradiction of strong domestic supply and weak demand, but it also amplifies the geopolitical risks faced by the Chinese economy, and the negative impact of external demand fluctuations on the domestic economy is also amplified.

New policies are brewing

At the beginning of this year, the Government Work Report proposed that the expected target for China's GDP growth rate in 2026 is 4.5% -5%, while emphasizing efforts to achieve better results in actual work. At the press conference of the State Council Information Office after the release of the growth rate target, Shen Danyang, the head of the government work report drafting team and director of the State Council Research Office, mentioned that the GDP growth rate target comprehensively considers the domestic economic operation and external environmental changes, taking into account both needs and possibilities, and is a positive and pragmatic goal that "jumps up and stabilizes the pace".

Looking back, in the first three quarters of 2024, the GDP growth rate showed a quarterly downward trend. However, with the introduction of the "924 New Policy" that year, the GDP growth rate in the fourth quarter of 2024 rose to 5.4%, an increase of 0.8 percentage points compared to the third quarter GDP growth rate; In 2025, the GDP growth rate will show a quarterly downward trend.

In the first half of this year, the GDP growth rate continued its quarterly downward trend, with year-on-year GDP growth rates of 5.0% and 4.3% in the first and second quarters, respectively.

At the press conference, in response to the question about the overall economic trend in the second half of the year, Mao Shengyong stated that various regions and departments will introduce more targeted and precise policies based on changes in the situation to promote stable economic operation and new and optimal development.

The economic situation expert and entrepreneur symposium held on July 13th mentioned that doing a good job in the second half of the year's economic work is directly related to achieving the annual development goals and a good start to the 15th Five Year Plan. We must follow the decisions and deployments of the Central Committee of the Communist Party of China, maintain the strategic determination of high-quality development, increase efforts in countercyclical adjustment, make good use of policies that fully utilize existing resources, pre study policies that increase reserves, and effectively consolidate and expand the stable and positive trend of the economy.

Zhang Lin stated that the latest wording of the National Bureau of Statistics itself conveys two layers of information: first, the policy direction has been clearly defined, with only differences in pace; The second is that the policy will focus on the effectiveness of policy implementation, accurately address structural contradictions, and will not simply implement aggregate stimulus.

Liao Bo stated that based on the policy signals released at various recent conferences, it is expected that there will still be a probability of reserve requirement ratio cuts in the future to promote broad credit and improve the availability of corporate funds. Secondly, it is expected that structural monetary policy tools will continue to be used, with a focus on the "quasi fiscal" function of new policy financial instruments. We believe that in the future, while maintaining a loose tone, the central bank will also simultaneously emphasize preventing capital from idling and guiding capital to enter the real economy, thereby improving the efficiency of stable growth

Regarding the possible time window for policy implementation, Zhang Lin stated that the Politburo meeting at the end of July this year is an important observation window, usually setting the tone for economic work in the second half of the year. In addition, the end of the third quarter is the time node for the issuance and use of special bonds and special treasury bond quotas to be basically completed, and it is also the window for the concentrated display of policy effects.

Overall, it is highly likely that incremental policies will be implemented gradually in the third quarter. The external variable that needs to be monitored is the direction of the US China tariff suspension arrangement after it expires on November 10th. If negotiations fail to reach a new extension arrangement by then, external demand in the fourth quarter may face certain disturbances, which is the hedging space that needs to be reserved in advance for domestic demand policies in the second half of the year, "said Zhang Lin.

From a specific policy direction perspective, Zhang Lin stated that fiscal policy will be the most direct lever. In the first half of the year, the investment in infrastructure turned negative, and the pressure on local fiscal revenue still existed, which meant that the issuance and use of special bonds and ultra long term special treasury bond needed to be accelerated to form physical workload as soon as possible. At the same time, policy oriented and development oriented financial instruments can be established or expanded in a timely manner to supplement capital for major projects and make up for the shortcomings of insufficient local supporting funds. There is still some room for the central finance to raise debt and deficit. In the fourth quarter, it is possible to further increase the deficit ratio and issue additional special treasury bond.

During the interview, several macroeconomic experts coincidentally mentioned the need to further promote consumption in the second half of the year. In the first half of 2026, the year-on-year growth rate of social zero is 1.3%, still at a historically low level.

Zhang Liqun stated that in the first half of the year, some consumption, investment and other data still showed a downward trend, and the pressure of supply-demand imbalance cannot be ignored. Next, it is necessary to increase the anti cyclical and cross cyclical adjustment of macro policies, and through efficient macroeconomic governance, quickly reverse the market led supply-demand imbalance.

In Zhang Lin's opinion, consumer policies need to continue to be strengthened in the second half of the year to hedge against the blank period caused by the retreat of the "trade in" policy. Without new follow-up policies, the year-on-year growth rate of social zero in the fourth quarter of this year may face significant pressure.

Liao Bo stated that expanding consumption and domestic demand are the focus of economic construction, and it is expected that subsequent policies will continue to focus on breaking down consumption constraints and enhancing the inherent stability of the capital market. Macro control policies may focus on boosting consumer confidence and increasing residents' disposable income through multiple channels.

Zhang Lin predicts that the GDP growth rate in the third and fourth quarters is expected to rebound to 4.6% to 4.8%, with an annual growth rate of around 4.7%. Liao Bo predicts that the domestic economy may continue its weak recovery trend in the third quarter, and the actual GDP growth rate is likely to remain at 4.5%. Overall, it is not difficult to achieve the economic growth target of 4.5% -5% for the whole year.

At the press conference, Mao Shengyong stated that the economic growth rate in the second quarter was 4.3%, a decrease of 0.7 percentage points compared to the first quarter, mainly due to some short-term factors and external influences. Overall, there are solid conditions and support to achieve the main expected goals for the whole year, especially the economic growth target.

(Author Tian Jin)