By Kevin Yao
BEIJING, July 13 (Reuters) – China’s economy likely slowed in the second quarter after a solid start to the year, as weak domestic demand offset the boost from resilient exports during a global oil shock, fueling market expectations for fresh policy stimulus.
Beijing is grappling with a deepening supply-demand imbalance, as strong industrial output, buoyed by AI-driven exports, contrasts with weakening consumption and private investment amid a prolonged property downturn and volatile global oil prices.
Gross domestic product is forecast have grown 4.5% year-on-year in April-June, cooling from 5.0% in the first quarter, a Reuters poll of 54 economists showed.
The projected pace would mark a fall from the 4.7% growth forecast in a Reuters poll in April and would be at the lower end of the official full-year target of 4.5-5%.
“Growth has become more uneven: exports continue to support headline activity, but domestic demand has softened notably,” analysts at Goldman Sachs said in a note.
“Moreover, the boost from exports has not translated into a stronger labour market or meaningful profit improvement, limiting the pass-through from external demand to domestic growth.”
China’s exports, due for release on Tuesday, likely grew at a slightly slower but still-solid pace in June, as firms accelerated shipments to the U.S. ahead of possible new tariffs, rode the AI boom, and competed aggressively on prices to win over cost-conscious consumers.
Investors are closely watching an expected late-July Politburo meeting for clues on fresh stimulus that could shape policy for the rest of the year. But analysts expect no aggressive action unless growth slows more sharply, given resilient exports and Beijing’s focus on curbing excess factory capacity to fight deflation.
GDP growth is projected to edge up to 4.6% in the third quarter before slowing to 4.5% in the fourth, according to the poll.
For 2026 as a whole, China’s GDP growth is forecast to cool to 4.6% from 5.0% last year, before easing further to 4.4% in 2027, according to the poll.
On a quarterly basis, the economy is forecast to have expanded 0.9% in the second quarter, slowing from 1.3% in January-March, the poll showed.
The government is due to release second-quarter GDP data and June retail sales, industrial production and investment data at 0200 GMT on July 15.
MODEST STIMULUS EXPECTED
Analysts expect China to lean on fiscal policy to cushion any further slowdown, as the central bank has limited room for high-profile easing even after the retreat in oil prices.
The government is expected to speed up fiscal spending after a second-quarter slowdown that followed front-loaded support early in the year. Beijing has set a budget deficit of around 4% of GDP for 2026 and lined up heavy bond issuance to shore up growth.
“China’s growth should pick up over the second half of this year as fiscal support ramps up,” Capital Economics said in a note. “But domestic overcapacity will remain entrenched, leaving China’s economy reliant on exports for growth.”
Analysts polled by Reuters expect the central bank to keep its key policy rate – the seven-day reverse repo rate – unchanged for the rest of 2026. They also expect the weighted average reserve requirement ratio to remain steady in the third quarter, before a possible 20-basis-point cut in the fourth.
The central bank has left policy rates and RRR unchanged since May 2025, opting instead to use short-term liquidity operations to keep funding conditions supportive while overhauling its monetary policy framework and strengthening policy transmission.
Analysts polled by Reuters estimate a 1.2% rise in China’s consumer prices for this year, below the government’s target of around 2%, before steadying at 1.2% in 2027.
(Other stories from the Reuters global economic poll)
(Polling by Susobhan Sarkar and Pulkit Khanna in BENGALURU and Jing Wang in SHANGHAI;Reporting by Kevin Yao; Editing by Sam Holmes)
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