Researcher highlights opportunities, challenges for China's economy

China's economy showed resilience in the first half of the year, as new growth drivers gathered momentum alongside policy support and a recovery in domestic demand, although relatively weak domestic consumption and an uncertain external environment remain key challenges, a senior researcher said on Wednesday.

Chen Wenling, a senior researcher at the Academy of Contemporary China and World Studies, said at a China News Service economic outlook forum that the economy had managed to repair weaknesses caused by the COVID-19 pandemic and a deteriorating global trading environment while simultaneously generating new sources of growth.

She attributed the improvement partly to the combined effect of existing and newly introduced policy measures, saying fiscal, monetary and industrial policies had worked together to support the recovery and foster new growth drivers. At the same time, exports remained resilient while domestic demand continued to recover, creating a more balanced growth pattern.

Against this backdrop, China largely achieved its major economic objectives during the first half, Chen said, stabilizing overall growth, improving the economic structure, expanding new sources of growth and containing major financial and economic risks.

The government had set a growth target of between 4.5 and 5 percent for 2026.

"The first-half GDP expanded 4.7 percent, laying a solid foundation for achieving the annual growth target."

Manufacturing upgrading remained one of the strongest pillars of the economy, according to Chen. While industrial output grew 5.4 percent year-on-year in the first half, high-tech manufacturing expanded 13.3 percent, supported by sectors including industrial robots, 3D printing, new energy vehicles, high-end equipment and AI hardware.

Although these emerging industries have yet to replace the property sector as the economy's largest growth engine, their contribution to creating new growth has become increasingly significant, she said.

On the demand side, Chen described the current pattern as "strong supply but relatively weak demand, with external demand outperforming domestic demand".

Chen said exports had provided an important cushion for growth while domestic demand continued to recover, particularly in services consumption.

She also argued that China's export performance reflected not only stronger overseas demand but also improvements in export quality, product mix and new forms of trade, including digital and services trade.

Looking ahead, Chen said China's economy still faces several structural challenges, including the mismatch between strong production capacity and relatively weak demand, widening divergence between fast-growing emerging industries and struggling traditional sectors, and persistent uncertainty in the external environment as trade protectionism continues to weigh on global commerce.

She added that resolving local government debt, stabilizing the property market and addressing employment pressures would remain important tasks in the second half of the year.