BEIJING: China’s economic growth is expected to further stabilise in the second half of the year (2H26), as policymakers step up efforts to address structural challenges arising from the transition in growth drivers while strengthening support for domestic demand, experts and executives say.
The comments came after a meeting last Thursday of the Political Bureau of the Communist Party of China (CPC) Central Committee, presided over by Xi Jinping, general secretary of the CPC Central Committee.
The meeting called for efforts to accelerate the transition from old growth drivers to new ones and effectively implement a more proactive fiscal policy and an appropriately accommodative monetary policy.
Economists said the meeting addressed a major challenge facing China’s economy, as rapidly expanding new industries have yet to fully offset the slowdown in traditional sectors, insufficient domestic demand and growing structural divergence.
Policy focus should not only be on stepping up macro policy stimulus and accelerating investment in emerging industries and industrial upgrading, but also on bolstering employment and income to foster broader growth, they added.
Zhu Feng, China chief economist at JPMorgan, said that growth momentum in the third quarter (3Q) and 4Q will likely improve from 2Q, but divergence could persist amid the transition from old to new growth drivers.
New growth engines, led by artificial intelligence (AI) and the smart economy, are likely to continue buoying related investment, high-tech manufacturing and some export sectors, while domestic demand, real estate, private investment and durable goods consumption still need time to recover, Zhu said.
China’s economy expanded 4.7% year-on-year in 1H26, driven by resilient exports and industrial output as high-tech manufacturing sectors benefited from a global wave of AI-related capital expenditure. By comparison, retail sales remained subdued, while fixed-asset investment contracted.
Gross domestic product growth weakened to 4.3% in the April to June period. In July, the official manufacturing purchasing managers index fell to 49.2, the National Bureau of Statistics said, indicating that falling market demand has caused factory activity to contract for the first time in five months.
“The key to meeting the annual growth target lies in accelerating fiscal policy implementation and, if necessary, introducing incremental fiscal measures, while better translating policy resources into growth in household employment and income, thereby boosting consumption and private investment,” Zhu said.
The meeting last Thursday said that pragmatic and effective incremental policies will be introduced in a timely manner, and it called for intensified efforts to effectively safeguard and improve people’s well-being.
The People’s Bank of China, the country’s central bank, pledged at a meeting last Saturday to comprehensively utilise monetary policy tools and make timely adjustments to keep ample liquidity.
Yin Yanlin, deputy director of the Committee on Economic Affairs of the 14th National Committee of the Chinese People’s Political Consultative Conference, said additional treasury bond issuance should be considered when necessary.
Further, monetary policy should cut the reserve requirement ratio and interest rates at a proper time as imported inflation pressure eases.
Ming Ming, chief economist at Citic Securities, said an 800 billion yuan (US$118.5bil) policy-based financial tool is likely to ramp up support for new types of infrastructure, including synergy between computing and electricity networks.
According to the National Development and Reform Commission, investment in computing network infrastructure in China could reach four trillion yuan during the 15th Five-Year Plan (2026 to 2030) period.
It also said that new growth drivers, including high-end manufacturing, the digital economy and modern services, had contributed more than 40% of economic growth in 1H26.
Such momentum is underpinning international institutions’ confidence in China’s economic transition. — China Daily/ANN
