China’s Stable Economic Growth Strengthens Global Economic Outlook

China’s July price data offers a timely snapshot of economic conditions at the start of the second half of 2026. The consumer price index (CPI) rose 0.5 per cent year on year and dropped 0.1 per cent month on month, with the month-on- month drop shrinking by 0.2 percentage points from June. Core CPI, which excludes food and energy prices, was up 0.9 percent year on year and 0.3 percent month on month. The producer price index (PPI) rose 3.5 percent from a year earlier, but declined 0.7 percent from June.

The CPI print suggests prices are rising at a modest pace, while the increase in core CPI shows underlying demand is holding up. The month-on-month declines in both CPI and PPI were driven in part by the fall in international crude oil prices from earlier highs, which lowered domestic fuel prices and costs for upstream industrial producers. This externally driven short-term adjustment does not alter the broader signal of gradual price firming since the beginning of the year.

CPI rose by 1.0 per cent on average in the first half, core CPI 1.2 per cent and PPI 1.5 per cent. But CPI inflation on average was still below the government’s annual indicative target of about two per cent.

A stronger and better-coordinated fiscal-monetary policy mix would provide support to aggregate demand, broaden price increases across sectors and make the annual target more attainable.

Stable economic growth and increasing contribution of new growth drivers support the gradual firming of prices. China’s GDP hit 69.57 trillion yuan ($10.31 trillion) in the first half, with real growth of 4.7 per cent amid an uncertain external backdrop. Services rose 5.2 per cent, and the value added by industrial enterprises above designated size – enterprises with an annual main business revenue of 20 million yuan ($2.8 million) or more – increased 5.4 per cent. High-tech manufacturing in the industry jumped 13.3 per cent and equipment manufacturing was up 9.3 per cent. This sectoral composition suggests that stable aggregate growth has been accompanied by continued industrial upgrading.
Industrial profitability is a complementary measure of demand and operating conditions. Industrial enterprises above designated size saw revenue increase 6.5 per cent in the first half, while total profits grew 18.7 per cent to 3.95 trillion yuan ($585 billion). Their operating-revenue profit margin was 5.70 per cent, up 0.59 percentage points on a year earlier and the highest cumulative monthly level since 2024.

Industrial performance was also supported by higher revenue, better cost conditions and stronger balance sheets. This improvement has been aided by policies to rein in “involution-style” competition, such as excessive price wars and duplicative expansion that squeeze corporate margins. These policies help to create more orderly market competition, giving firms more space to invest in research, product quality and technological upgrading, which in turn heightens incentives for innovation.

In terms of investment composition, fixed-asset investment declined 5.7 per cent in the first half, but the decline was 2.7 per cent if excluding real estate development. Investment in real estate development fell by 18.0 per cent. In sectors where supply grows faster than demand, slower investment can assist inventory adjustment, reduce excessive price competition and improve the conditions for profitability and property market stabilization.

At the same time, investment continued to flow to activities associated with technological progress and productivity growth. Investment in intellectual property products grew 9.4 percent, and investment in the high-tech industry rose 4.6 percent. This included 23.3 per cent growth in aerospace equipment manufacturing and 15.5 per cent in information services. The investment slowdown was thus not uniform, but was accompanied by a reallocation of capital to sectors with greater long-term growth potential.

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China’s stable growth is particularly important when momentum in the global economy is weakening. In its July World Economic Outlook Update, the International Monetary Fund (IMF) cut its forecast for global growth in 2026 from 3.3 per cent to 3.0 per cent compared with its January update. But over the same period the IMF has raised its forecast for China’s growth by 0.2 percentage points to 4.6 per cent.

The flip side of these revisions provides external confirmation of China’s underlying economic strength. The global outlook has darkened but China’s continued expansion continues to generate demand, investment opportunities and policy predictability, making it an increasingly important anchor for global growth.

This contribution channels directly to other economies thru trade. China’s goods import and export grew 16.9 per cent in the first half. Imports grew by 22.1 per cent to 10.74 trillion yuan ($1.59 trillion), transforming internal demand into output and income overseas. Trade with countries participating in the Belt and Road Initiative increased 14.8 per cent. Expansion of high-tech manufacturing and exports of mechanical and electrical products also support international supply chains and diffusion of equipment used in digitalization, industrial upgrading and green transition.

The policy implication is twofold. Stronger fiscal and monetary coordination at home can help to reinforce demand, making the rise in prices broader and more durable. On the international front, China’s stable growth, rising imports and ongoing industrial upgrading provide a source of demand and predictability in a global economy that is facing uncertainty.

The July figures are consistent with that broader assessment: Prices are rising modestly, underlying demand is improving, and the economy continues to be resilient and able to grow further.

Editor’s Note: This article is excerpted from the China Global Television Network (CGTN). The author, Li, is a special commentator for CGTN and an Assistant Professor of Economics at the National School of Development, Peking University, Beijing, China.