China’s economic growth slowed sharply between the beginning of April and the end of June as weak domestic demand and the impact of the Iran war on oil prices overshadowed the country’s strong exports.
Official gross domestic product (GDP) data showed the world’s second-largest economy grew 4.3% in the second quarter, below Beijing’s annual target, and after 5% growth in the first quarter.
It comes as government data showed China’s exports rose 27% in June compared with a year earlier.
In March, China cut its growth target to a range of 4.5%-5%, its lowest economic expansion target since 1991, with some analysts saying the move gives authorities more flexibility in managing the economy.
The announcement represents the first full quarter of GDP data since the start of the Iran war on February 28 and marks the lowest quarterly expansion since the end of 2022, as China was emerging from its strictest Covid-19 restrictions.
“There are greater external volatility and uncertainty factors,” China’s National Bureau of Statistics said in a release accompanying the figures.
It also noted the imbalance between strong supply and weak demand in the domestic economy.
Separate data released on Wednesday highlighted the economic challenges Beijing faces domestically – including a long-running property market downturn and weak consumer spending.
New home prices fell again, although the 0.1% decline in June was at a slightly slower pace than the previous month.
But retail sales rose 1% in June, improving from a 0.6% decline in May.
Fabian Yip, market analyst at investment platform IG, told the BBC that China’s businesses are absorbing higher energy and raw material costs “because demand is currently too weak to bear it”.
He said that the longer the Iran war continues, the more difficult it will become to handle the situation.
Customs data for June, which was released on Tuesday, showed that China’s tech exports were boosted by rising global demand for semiconductors to power artificial intelligence (AI) data centres.
Rising demand for Chinese electric vehicles (EVs) also gave a big boost to China’s exports – monthly car exports topped one million for the first time.
