China Economic Outlook. September 2026

The Chinese economy slowed to 4.3% in Q2 2026 due to domestic risks such as a supply-demand mismatch, weak consumption, and a housing crisis. The GDP growth forecast is maintained at 4.5% for 2026 and 4.2% for 2027, and the CPI forecast is lowered to 0.8%.

Key points

• Key points:
• Fixed asset investment contracted by 7.2% y-o-y through August, dragged down by the collapse in real estate investment (-19.2%), while retail sales weakened due to low income expectations and high youth unemployment (15%).
• The deflationary environment persists, with CPI at 0.8%. The pass-through from PPI to CPI is limited due to the supply-demand mismatch and weak consumption sentiment.
• Despite domestic weakness, export growth averaged 19.5% between January and August 2026, while imports grew by 26.5%, driven by AI-related and high-end manufacturing sectors.
• The PBoC remains cautious, keeping rates on hold. A rate cut is not ruled out in the next year, and at most one RRR cut is expected.

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