China’s economic growth, buoyed by stronger-than-expected exports and rapid artificial intelligence innovations, is expected to have remained on stable footing in the first half of the year, with major international institutions expressing growing confidence in the country’s economic outlook, economists said.
While external demand for high-tech products is expected to sustain growth momentum in the second half of the year, they said that policymakers should direct greater efforts toward stimulating domestic demand to achieve a more balanced recovery.
The economists made the remarks while awaiting details of China’s economic performance in the first half of the year. Those figures are scheduled to be released next week.
Confidence in China’s economic outlook has strengthened in recent weeks, with several major international institutions raising or maintaining relatively upbeat growth forecasts despite a slowing global economy.
On Wednesday, the International Monetary Fund lifted its 2026 growth forecast for China by 0.2 percentage points to 4.6 percent, citing stronger-than-expected first-quarter expansion driven by robust public investment, high-tech manufacturing and exports.
The World Bank has also highlighted resilient high-tech investment and exports as key factors supporting China’s economy this year despite global energy supply shocks. According to its latest China Economic Update, the world’s second-largest economy is expected to expand 4.4 percent in 2026, against a backdrop of slowing global growth, which is projected at 2.5 percent for 2026.
Economists said China’s resilience has been underpinned by solid export performance, particularly in high-tech and value-added manufacturing, as well as rapid industrial upgrading fueled by AI.
Robin Xing, chief China economist at Morgan Stanley, said that China’s “current economic momentum is being driven primarily by export growth and industrial upgrading”.
China’s supply chain resilience, according to Xing, is becoming more visible in sectors such as AI hardware, electric vehicles, energy storage, photovoltaics and wind power, where its export market share continues to rise.
Data from the General Administration of Customs showed that China’s exports of high-tech and high-value-added mechanical and electrical products surged 18.4 percent year-on-year to 7.58 trillion yuan ($1.11 trillion) in the first five months of 2026, accounting for 63.6 percent of the country’s total exports.
China’s economy grew 5 percent year-on-year in the first quarter, reaching the upper end of the government’s annual target range of 4.5 to 5 percent.
Economists expect momentum may have slightly moderated in the second quarter, with some projecting first-half GDP growth of around 4.5 to 4.7 percent.
Alongside resilient economic growth, inflation has remained mild. In the first half of the year, China’s consumer price index rose 1 percent year-on-year, while the core CPI, which excludes food and energy prices, increased 1.2 percent, data released by the National Bureau of Statistics showed on Thursday.
The K-shaped recovery — one in which different parts of the economy recover at different rates or times — has been a hotly debated topic among economists who monitor China’s economic growth, with AI-related industries and exports outpacing consumption and the property sector. Therefore, turning policy support into domestic demand is seen as a key challenge in the second half.
That divergence has also drawn increasing attention from policymakers. At the second-quarter meeting of its monetary policy committee, the People’s Bank of China, the country’s central bank, flagged “structural divergence” as a challenge facing the economy, while pledging to continue implementing an appropriately accommodative monetary policy.
Lu Ting, chief China economist at Nomura, pointed out that the export boom has not yet translated into broad-based income growth, as high-tech manufacturing is increasingly capital-intensive and automated while the property market remains a drag on household wealth and sentiment.
Wen Bin, chief economist at China Minsheng Bank, said the key for boosting domestic consumption is the “substantive implementation” of the urban and rural resident income growth plan, which was outlined as a priority in this year’s Government Work Report.
Expected measures include raising minimum wages, providing special additional deductions for individual income tax, and increasing pension and medical insurance.
Xiong Yi, chief economist for China at Deutsche Bank, said: “We see the government implementing more policies to support domestic demand, especially in the services sector. Coupled with declining oil prices, we believe strengthening domestic demand will be a key support for China’s growth in the second half of the year.
“A key measure is cash handouts to families raising children, which began last year. This is a long-term policy, and the benefits could even potentially be increased in the future,” Xiong added. “With these supportive government policies both on the supply side and the demand side for services consumption, we see services spending becoming a longer-term driver for Chinese consumer spending, not just for this year, but for the next five to 10 years.”
Zhou Lanxu contributed to this story.
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