China's Economy Grows 4.7% in H1 2026 as Three-Year Deflation Streak Finally Breaks

China's economy grew 4.7% year on year in the first half of 2026, with second-quarter expansion of 4.3%, as the country's three-year deflation streak was finally broken by rising global energy prices and surging demand linked to artificial intelligence infrastructure, Caixin Global reported on 15 July 2026. The growth figure, while below the official full-year target of "around 5%", was sufficient to keep the target within reach without additional stimulus.

Key data

• H1 2026 GDP growth: +4.7% year on year
• Q2 2026 GDP growth: +4.3% year on year
• Three-year deflation streak broken by energy prices and AI-related demand
• Official full-year target: "around 5%"
• Estimated H2 growth needed to hit target: ~4.3%
• July Politburo: no new major stimulus wave announced
• Property sector: remains the primary structural drag

Policy stance

At its July meeting, the Politburo signalled that Beijing would forgo a major new stimulus package, judging that the growth target remained achievable under current policy settings. Economists including Xiong Yuan of Guosheng Securities estimated that only approximately 4.3% growth in the second half would be needed to deliver the full-year objective. The fiscal deficit is being held near 4% of GDP, and monetary policy remains "moderately loose" with modest rate and reserve-requirement cuts rather than aggressive easing.

The Central Economic Work Conference held in December 2025 had set domestic demand revival as the core priority for 2026, with the 15th Five-Year Plan incorporating a household income-growth target for the first time. Capital Economics expected rate cuts of around 30 basis points and a reserve requirement ratio reduction of 75 basis points over the year, but explicitly ruled out a "big bazooka" property or debt stimulus.

Property and structural challenges

The property sector remained the primary drag on China's economy in 2026. Citi economist Yu Xiangrong estimated that inventory would need more than 30 months to clear at current absorption rates. Policy remains incremental — city-specific purchase restrictions, government buy-ups of unsold homes for conversion to social housing, and subsidised mortgages — with Beijing deliberately avoiding reflating the bubble. An eight-month investment decline reported in September 2026 underscored the persistence of the property drag even as the headline growth figure held up.