A mixed gdpicture

Marketing communication 30 July 2026

Contents RaboResearch Lower than expected growth 1 China’s first 5-year plan prioritizing consumption. 4 Global Economics & A previous pillar of growth seems crumbling 2 Looking forward 5 Markets China’s economy increasingly leans on exports 3 knowledge.rabobank.com

Teeuwe Mevissen Summary Senior Macro Strategist  China’s GDP growth for Q2 came in lower than expected  China needs to transition its economy via increased domestic consumption  The first ever 5-year plan prioritizing consumption seems to indicate some level of urgency  Transitioning towards a new economic model will lead to lower GDP growth in the coming years

Lower than expected growth Figure 1: For the first time China exported more China’s economy slowed more significantly than half a million EV’s in just one month. than was generally anticipated, data showed in July. China’s GDP grew with 4.7% YTD which translates in 4.3% YoY while economists predicted 4.8% YTD and 4.5% YoY respectively. China’s economy has been negatively affected by the crisis in the strait of Hormuz despite being relatively well positioned to weather such a significant energy shock. Moreover, the most recent export data coming from China indicated that demand for China’s goods from abroad remained at record levels. While these exports are partly fuelled by demand for Source: Macrobond products that are used for the AI revolution, China also exported a record amount of 1.000.000 cars of which more than half are now EV’s.

Data also showed that China’s economy continues to face significant several economic headwinds. The most significant headwind remains weak domestic consumption despite the fact that retail sales over June came in significantly better than anticipated at 1% YoY vs -0.1% YoY expected. Consumption of tobacco and alcohol (12.1%), cosmetics (12.6%), office supplies (12.7%) and communication appliances (16.5%) all rose with double digits. At the same time, large drops in consumption were measured for construction materials and automobiles (10.5% and 16.1% respectively). The latter puts the car export numbers even more into perspective.

While retail sales and imports surprised to the upside, we believe that we cannot yet conclude that domestic demand has turned the corner and has embarked on a sustainable recovery. One only has to look at the price developments in the real estate sector to raise serious doubts. The record decrease in property investments of -18% YTD and the fall in residential property sales of 13.7% reported over June this year further illustrate that the real estate crisis is far from being solved and that, if anything, the crisis is deteriorating instead of approaching a bottom. A declining population combined with significant oversupply add to the sector’s problems.

1/9 RaboResearch | A mixed GDPicture | 30-07-2026, 10:56 Please note the disclaimer at the end of this document.

Indeed, it is the same real estate crisis that is the main reason for suppressed consumer sentiment and consequently, retail sales. We therefore think it is likely that we will see a return of subsidies and measures that incentivise consumption. Moreover, we also continue to stick to our off consensus forecast of two minor PBOC rate cuts of 10 bp each for the remainder of this year.

A previous pillar of growth seems to be crumbling Figure 2: Beijing still has space to increase With consumption and exports performing expenditures better than expected but GDP coming in worse than expected, China’s problems must lie in either government consumption, investments and/or (rising) imports. While imports have increased, China trade surplus is still around record highs. Additionally, government expenditures have steadily, though slowly, increased over time to about 17% of GDP when one uses the narrow measure (33% if one uses the broader measure). As such the central government still has ample room to speed up and/or increase China’s public expenditures. Source: Macrobond

This leaves us with investments, which have been a crucial pillar for China’s economic model. For years, investments in the real estate sector (including infrastructure) accounted for about 25%…