SCIO briefing on China's economic performance in July 2026

Reuters:

Could you analyze the country's economic performance in July from both the supply and demand sides? What impact will recent high temperatures, heavy rainfall, typhoons and flooding have on economic performance in the third quarter? Will China be able to meet its annual economic growth target? Thank you.

Fu Linghui:

Thank you for your questions. The first concerns production and demand in July. We gave an overview of July's economic performance in our earlier remarks. Overall, it remained generally stable, with no major changes in supply or demand.

The second question concerns the impact of recent extreme weather on the economy in the third quarter and whether the full-year economic growth target can be achieved. Recent extreme weather events, including high temperatures and heavy rainfall, have caused natural disasters in some areas and will weigh on economic activity. The impact is generally manageable, however, and the broader trend of economic development remains unchanged. For the year as a whole, China has a sound foundation and favorable conditions for achieving its economic growth target. Since the beginning of this year, China's economy has absorbed many external shocks, overcome domestic difficulties and maintained stable performance. Despite numerous risks and challenges ahead, the overall trend of stability in China's economy has not changed. New growth drivers continue to expand, reform and opening up is deepening and macro policies are becoming more forceful and effective. On that basis, the economy is expected to remain generally stable while gaining new momentum and improving in quality, providing strong support for meeting the annual economic growth target. Specifically, several factors underpin this assessment:

First, the economic fundamentals are solid. As an economy of enormous scale, China is underpinned by a complete industrial system and the strengths of its vast domestic market. It has ample room for maneuver as well as strong resilience and vitality, and stability remains a notable feature of its economic performance. Since the beginning of the year, despite fluctuations in the international energy market and mounting external pressures, China's economy has held steady. In July, parts of the country were hit by frequent extreme weather events and natural disasters, including high temperatures and heavy rainfall, disrupting market supply and demand. Nevertheless, the economy remained stable and continued to make progress, demonstrating its solid foundations and strong capacity to withstand shocks. From January to July, the value added of industrial enterprises above designated size grew 5.3% year on year, and the services production index grew 4.7%. Both rates remained relatively rapid. The surveyed urban unemployment rate stood at 5.2% and consumer prices rose 0.9% year on year, both remaining generally stable. Total goods imports and exports increased 17.3% year on year. The RMB exchange rate remained stable and appreciated slightly, and foreign exchange reserves stayed above $3.4 trillion. These solid fundamentals and strong resilience provide a firm foundation for China's steady economic development.

Second, new growth drivers are providing strong support. China is accelerating the transition from traditional to new growth drivers, and as those drivers gather strength and momentum, their contribution to economic growth is becoming increasingly evident. In the first half of the year, new growth drivers, including the digital economy, accounted for more than 40% of economic growth. July's figures show that new growth drivers continued to make a notable contribution to growth. In the industrial sector, new growth drivers accounted for 50% of the growth in value added of industrial enterprises above designated size from January to July. On the production side, digitalization and intelligent transformation are accelerating, providing a strong boost to related industries. In July, the value added of digital product manufacturing increased 17.3% year on year, while the production index for the information transmission, software and information technology services grew 9.3%, both maintaining rapid growth. The AI industry chain is developing soundly, with output of products such as memory chips and industrial robots rising rapidly. On the demand side, investment in emerging fields continued to grow. At the same time, consumer spending on culture, tourism and leisure, as well as on digital products, expanded further, injecting new momentum into economic development. From January to July, investment in high-tech industries increased 5% year on year, while retail sales related to tourism and cultural, sports and leisure services both grew more than 10%. As technological innovation and industrial innovation become deeply integrated and new forms of the intelligent economy continue to emerge, the role of new growth drivers in supporting economic development will continue to strengthen.

Third, macroeconomic policies have become more effective. Since the beginning of this year, fiscal and monetary policies have been better coordinated. Work on implementing major national strategies, enhancing security capacity in key areas, as well as on carrying out large-scale equipment upgrades and consumer goods trade-in programs, has been steadily advanced. Policies to expand capacity and improve quality in the service sector have been introduced and implemented. These measures have provided strong support for the stable performance of the economy. Fiscal and financial policies have also stepped up support for the real economy. By the end of July, the outstanding balance of aggregate social financing had increased 7.4% year on year. The consumer goods trade-in program continued to deliver results. From January to July, retail sales of cultural and office supplies by enterprises above designated size rose 6% year on year, while sales of telecommunications equipment rose 15.1%, both relatively rapid rates. Demand for equipment renewal continued to be released. From January to July, investment in equipment and instruments grew 9% year on year, contributing 1.5 percentage points to overall investment growth. The Political Bureau of the CPC Central Committee, at its meeting at the end of July, made comprehensive arrangements for economic work in the second half of the year, and relevant departments are moving quickly to implement them. As existing policies take fuller effect and practical new incremental policies are rolled out, their combined effects will continue to unfold, contributing to sustained economic improvement.

It is also important to note that efforts to build a unified national market are being further advanced, and high-standard opening up is making steady and substantive progress. More will be done to remove barriers and bottlenecks, so as to unleash the dividends of reform and opening up and boost the vitality and momentum of the economy. Going forward, we need to maximize the effectiveness of policies, accelerate the transformation of growth drivers, steadily pursue high-quality development, and better safeguard and improve people's well-being. Thank you.