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China Q2 growth slows, increasing pressure for more stimulus in H2

H1 GDP was 4.7% year-to-date, and the Q2 deflator turned positive for the first time in three years as higher oil prices ended deflation.

Reported · Written up by our desk · Central Banks

Commerzbank analysts said China’s Q2 2026 GDP growth slowed to 4.3% year-on-year, undershooting Beijing’s 4.5% to 5% target range and missing consensus expectations of 4.5%. The bank also pointed to a sharper contraction in fixed-asset investment, with H1 investment falling 5.7% year-on-year.

Despite the slowdown, Commerzbank noted that June industrial output and retail sales came in above expectations, offering some partial relief. The analysts said the GDP print reflected a deceleration from the 5.0% expansion recorded in Q1.

Commerzbank added that, with H1 GDP at 4.7% year-to-date, policymakers would likely need stronger momentum in the second half to avoid missing the annual growth goal. It also highlighted that the GDP deflator turned positive in Q2, rising 1.6%, after higher oil prices ended a three-year stretch of economy-wide deflation.

The bank said the data reinforces a K-shaped pattern, with export-oriented and technology-linked manufacturing doing better than domestic consumption and investment. Against that backdrop, Commerzbank said pressure is mounting for additional support, following the PBoC’s pledge to keep policy moderately loose and strengthen measures for domestic demand and technological innovation.

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