The ongoing conflict in the Middle East centered on Iran has begun to weigh on the global economy. Rising oil prices, disruptions to supply chains, and growing uncertainty in international trade have slowed China's economic growth. At the same time, demand in both domestic and overseas markets has remained weaker than expected. Analysts warn that if the conflict continues, it could place further pressure on exports, manufacturing, and investment, creating new challenges for the world's second-largest economy.
China's economic growth slowed in the second quarter of the year, with the world's second-largest economy expanding at a weaker-than-expected pace. Rising energy prices triggered by the Iran war, weak domestic demand, and the prolonged crisis in the property sector all contributed to the slowdown during the April–June period.
However, just a day earlier, the Chinese government reported that exports surged by 27 percent in June compared with the same month last year, driven by strong overseas demand for electric vehicles (EVs) and technology products.
According to official data released on Wednesday, China's gross domestic product (GDP) grew by 4.3 percent in the April–June quarter, down from 5 percent in the previous quarter. Beijing has set an annual growth target of between 4.5 and 5 percent for this year, meaning second-quarter growth fell short of that goal. The target, announced in March, is China's lowest annual growth target since 1991. Analysts say the lower target was intended to give policymakers greater flexibility in managing the economy amid global uncertainty.
The latest GDP figures are particularly significant because they represent the first full quarter of economic data since the Iran war began on February 28. They also mark China's weakest quarterly growth since the country lifted its strict COVID-19 restrictions at the end of 2022.
China's National Bureau of Statistics (NBS) said global uncertainty and instability have intensified. While industrial production has continued to expand, consumer demand has not kept pace, leading to growing imbalances within the economy.
A separate government report showed that the country's property sector remains under pressure. New home prices fell again in June, although the pace of decline eased to 0.1 percent from the previous month.
There were, however, some encouraging signs in consumer spending. After retail sales declined by 0.6 percent in May, they rebounded by 1 percent in June.
Customs data released on Tuesday showed that China's exports rose 27 percent year-on-year in June. Strong global demand for semiconductors used in artificial intelligence (AI) data centres helped boost exports of technology products.
At the same time, international demand for electric vehicles continued to rise rapidly. The Iran war drove up global energy prices, prompting many countries to accelerate the shift toward EVs in an effort to reduce dependence on conventional fuels and mitigate energy-related uncertainties.
Against this backdrop, China's monthly vehicle exports exceeded one million units for the first time in June. Analysts believe that robust export performance has helped offset much of the pressure caused by weak domestic demand.
