China’s economic performance in the first half of 2026 demonstrated growing resilience against external headwinds, including disruptions in the Middle East, tariffs, and sanctions.

The country’s GDP reached 69.57 trillion yuan ($10.3 trillion), up 4.7 percent year-on-year, keeping the full-year growth target on track.

While second-quarter growth moderated to 4.3 percent following a stronger 5 percent in the first quarter, industrial output, retail sales, and services all continued to expand. Furthermore, urban unemployment eased to 5 percent in June, while per capita disposable income rose 5.2 percent. Notably, the GDP deflator has turned positive after 12 quarters of deflation.

New growth drivers, such as high-end manufacturing, the digital economy and modern services, which capitalize on speed, scale, and technological integration, contributed over 40 percent of first-half growth.

The World Bank projected a steady 4.4 percent growth for China in 2026, noting that high-tech investment rose 4.5 percent year-on-year in January-May. The OECD has forecast 4.5 percent growth, citing strong semiconductor production and exports.

China’s foreign trade reached a record high of 25.47 trillion yuan during the first half of 2026, with an impressive 16.9 percent year-on-year growth reinforcing China’s status as the world’s leading goods trading nation. A key feature was a shift in trade dynamics. With import growth outpacing export growth, China has made substantial progress toward a balanced trade structure and increased consumer demand.

The transition to new growth drivers was decisive. Mechanical and electrical equipment exports increased 20.1 percent, accounting for 63.5 percent of all exports. High-tech exports surged 39 percent while AI and computing components posted double-digit growth. Exports of electric vehicles grew by 68.7 percent, while those of lithium-ion batteries were up 37.6 percent, and shipments of wind turbines and associated green power generators rose 35.6 percent.

Next-gen green mobility exports of railway locomotives grew 45.1 percent, and electric motorcycles and bicycles rose by 31.5 percent. China exported over 10,000 units of AI-powered intelligent bionic robots to more than 90 countries and regions.

For 17 consecutive years, China has been the world’s second-largest import market, accounting for roughly 10 percent of global import demand.

By granting zero-tariff treatment to 63 developing nations, the Chinese market facilitated import growth from more than 150 countries and regions.

Trade with Belt and Road countries rose 14.8 percent to 12.97 trillion yuan, representing 50.9 percent of China’s total foreign trade. Africa trade rose 19.6 percent, Latin American trade expanded 16.2 percent, and commerce with regional neighbors jumped 20.6 percent to 9.44 trillion yuan.

Trade with the European Union also increased by a solid 10.2 percent. Foreign-invested enterprises and multinationals remain highly integrated within this ecosystem, shifting from “manufacturing in China” to “innovating in China”.

Malaysia and Singapore have pointed to spillover effects from weaker demand, tariffs, and supply-chain disruption. Nevertheless, the global market’s deep reliance on China’s high-value, tech-driven exports creates mutual interdependence, rendering complete decoupling economically unfeasible.

China and the Association of Southeast Asian Nations are each other’s largest trade partners, meaning any domestic slowdown would quickly impact Southeast Asia through trade demand, supply chains, and commodity prices.

However, China’s strong first-half performance has provided a vital economic buffer. Indonesia’s trade with China rose in early 2026, Cambodia’s total first-half trade with China exceeded $11 billion, and Thailand’s export sector is projected to grow 8 percent to 10 percent, driven by electronics and AI-related demand.

China’s first-half performance in 2026 confirms the wisdom of transitioning to new growth drivers and strengthening resilience built on innovation. Its robust GDP growth of 4.7 percent reflects nuanced fiscal support and policy responses to external disruptions and domestic challenges in the property sector as consumption remains soft.

The underlying story, however, is one of sustained growth. As the 15th Five-Year Plan (2026-30) begins, the central task for the second half of 2026 is to localize policy inputs, maintain fiscal flexibility, and balance domestic property and consumption challenges with export and manufacturing strengths.

The author is the chair of BRCP Geopolitical Risk Advisory, publisher of The Chair Media Group, and visiting professor at ICES, France. 

The views do not necessarily reflect those of China Daily.