China Enters a Period of More Moderate Economic Growth

In its July update to the World Economic Outlook, the International Monetary Fund raised its estimate for China’s GDP growth in 2026 from 4.4% to 4.6%. For 2027, the IMF expects growth to slow further to 4.1%. By comparison, China’s economy grew by 5% in 2025. The IMF notes that current growth remains relatively resilient, but the medium-term outlook is complicated by weak consumer activity, declining productivity, and demographic changes. (Source: International Monetary Fund, July 8 and 9, 2026).

The latest statistics point to a marked divide between the external and domestic sectors of the economy. In August, industrial production rose 5.2% year over year, following growth of 4.5% in July. Goods exports increased by about 25%. Retail sales, however, rose by just 0.4%, while fixed-asset investment fell 7.2% in January and August compared with the same period a year earlier. The real estate sector remains particularly weak, with investment down by nearly one-fifth over the first eight months of the year. The Financial Times notes that the ongoing fall in housing prices is weighing on consumer confidence and remains one of the main obstacles to a recovery in domestic demand. (Source: National Bureau of Statistics of China, September 15, 2026; Financial Times, September 15, 2026; Yahoo Finance, September 15, 2026).

This growth pattern is making China’s economy increasingly dependent on foreign markets. High levels of industrial production are supported by overseas demand, while domestic consumption remains subdued. The IMF considers the transition to a model in which consumer demand plays a greater role one of China’s main economic policy challenges. This will require reducing households’ propensity to save, supporting the real estate market, and taking measures that can boost public confidence in future incomes.

Strong exports are still allowing China to maintain fairly high growth rates, but their ability to offset domestic problems is gradually diminishing. The growing trade surplus is already heightening tensions with several major trading partners, as Chinese manufacturers expand their presence in foreign markets. At the same time, weak domestic sales are limiting incentives for private investment.

A slowdown to around 4% in the coming years would not, in itself, signal a sharp deterioration in China’s economic situation. The more important change is in the sources of growth. Continued reliance on manufacturing and exports could support GDP in the short term, but would make the economy more sensitive to external demand and trade restrictions. The growth trajectory will be more sustainable if domestic consumption and investment recover. Domestic demand will likely determine whether China can stabilize growth after the expected slowdown in 2027.

Author: Assistant, Department of World Economy and International Finance, Financial University under the Government of the Russian Federation, Nikita Dmitrievich Klevanets.