China Grows 4.3 Percent in Second Quarter, Weakest Pace Since Late 2022

China's economy expanded 4.3 percent year on year in the second quarter, slowing from 5.0 percent in the first quarter and coming in below the lower bound of Beijing's 4.5 to 5 percent annual target. According to figures reported alongside the release, it was the weakest quarterly reading since the final quarter of 2022, the period when strict pandemic controls were still in place.

The composition of the growth matters more than the headline figure. Exports tied to artificial-intelligence hardware remained strong, but subdued household spending, cautious private investment, and a housing downturn now in its fifth year weighed the figure down. There were faint signs of stabilization in property, with new-home prices in the four largest cities rising an average of 0.1 percent last month, a fourth straight monthly gain, though prices outside the top tier stayed soft.

An Austrian-school reading of the data points to the source of the strain. Years of credit-financed construction produced apartment blocks and infrastructure that households do not need at prices the market will no longer pay, and correcting that misallocated investment cannot be avoided through further stimulus without delaying the adjustment. With domestic demand weak, Beijing relies more on exporting its manufacturing surplus, which sustains trade friction with partners already absorbing cheaper Chinese goods.