China’s economy has sharply lost momentum entering the second half of 2026, with factory output, retail sales, and investment all falling short of expectations. In July, industrial production growth slowed to 4.5% year-on-year and retail sales rose by only 0.6%, while private investment declined by 9.4%. Real estate development investment plummeted 19.2% year-on-year, adding to fiscal pressure on local governments. The manufacturing PMI fell to 49.2, below the 50-point threshold separating expansion from contraction, with the new orders sub-index hitting a 38-month low. Exports, however, continued to support the economy with 14.0% growth over the first seven months of the year.
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