China: Slower 2Q26 growth outlook – UOB

2Q26 GDP Growth Forecast

4.7%

Projected year-on-year GDP growth rate for China in the second quarter of 2026.

1Q26 GDP Growth Rate

5.0%

Year-on-year GDP growth rate for China in the first quarter of 2026.

Full-Year 2026 Growth Outlook

4.7%

Maintained full-year GDP growth forecast for China in 2026.

§ 01 Executive Snapshot

What: China’s GDP growth outlook for 2Q26 is revised downward to 4.7% year-on-year.
Who: UOB’s economist Ho Woei Chen provides insights on the economic outlook.
Why it matters: The forecast indicates challenges in the manufacturing sector and highlights vulnerabilities in domestic demand, which may influence policy decisions.

China's manufacturing PMIs are at the expansion threshold but showing signs of losing momentum due to external demand issues and cost pressures.
The services sector shows a modest rebound, but domestic demand remains a significant vulnerability requiring policy attention.
Full-year GDP growth forecast for 2026 is maintained at 4.7%, indicating a cautious economic environment.

Recent PMIs reflect a slowdown that aligns with broader macroeconomic indicators from April, indicating ongoing economic challenges.
The growth forecast is set against an official target of 4.5%-5.0%, suggesting that any policy interventions will be measured and incremental unless significant downward pressure on growth is observed.

Immediate implications include a potential slowdown in manufacturing impacting exports and overall economic stability.
Long-term implications may involve strategic policy adjustments to strengthen domestic demand and mitigate vulnerabilities in the economy.

Potential risks include continued external demand weakness and rising costs due to geopolitical tensions, particularly in the Middle East.
The reliance on calibrated policy responses may limit the government's ability to respond swiftly to economic downturns.

Monitoring upcoming PMI releases will provide insights into manufacturing and services sector performance, which could influence GDP revisions.
Future policy announcements will signal the government's approach to addressing economic vulnerabilities and supporting growth.

§ 07

What is the revised GDP growth outlook for China in 2Q26?

China’s GDP growth outlook for 2Q26 is revised downward to 4.7% year-on-year.

Why is the manufacturing sector facing challenges in China?

The manufacturing sector is showing signs of losing momentum due to external demand issues and cost pressures.

How might policy decisions be influenced by the economic outlook?

The forecast highlights vulnerabilities in domestic demand, which may influence policy decisions to address these challenges.