Massive-scale market activates China's growth momentum

Editor's note: Xu Xuemei is an assistant research fellow at the Department for World Economy and Development, China Institute of International Studies (CIIS). The article reflects the author’s opinions and not necessarily the views of CGTN.

On July 15, the National Bureau of Statistics releases China's half-year economic data. Preliminary accounting shows that gross domestic product (GDP) in the first half of the year reaches 69.57 trillion yuan ($10.28 trillion) , up by 4.7% year on year at constant prices.

This outcome is achieved against the backdrop of intensifying external shocks. Following the outbreak of the US-Iran military conflict, energy supply chains in the Middle East and global supply chains have faced persistent disruptions. Short-term uncertainty of China's external economic environment has risen markedly.

To offset external headwinds, China's macroeconomic policy has accorded greater prominence to "expanding and strengthening the domestic big cycle," deploying a package of instruments including expanding domestic demand, boosting production and smoothing circulation. The super-sized domestic market underpinned by a population of over 1.4 billion provides considerable cushion against external shocks and constitutes a key foundation of China's economic resilience.

Consumption remains the primary driver for China's economic growth and a core component of domestic demand. Data from the National Bureau of Statistics show that in the first half of the year, market activity has been on the rise, providing strong boost for GDP growth.

In the first half of 2026, the total retail sales of goods and services increase by 2.7% year on year, among which, the retail sales of services grow by 5.3% and that of goods up by 1.1%. Also, in the same period, China's total goods trade reaches 25.47 trillion yuan, with a year-on-year increase of 16.9%. Specifically, growth rate of imports is 8.7 percentage points faster than exports, further proving the consumption potential of China's massive domestic market.

There are two main reasons for the increase in domestic consumption. First is the steady growth of household income. In the first half of the year, the nationwide per capita disposable income of households was 22,981 yuan, a nominal growth of 5.2% year on year, which is basically in sync with GDP growth.

As incomes increase, residents' consumption demands become more diverse and upgraded. For example, in terms of retail sales of services, communication information services, tourism consultation and rental services, and cultural, sports and leisure services grew fast in the first six months. Catalyzed by holidays such as Labor Day and the Dragon Boat Festival, the potential of service consumption has been substantially unleashed.

The other factor is the government's policy to vigorously boost consumption and enhance consumption capacity. For example, Since the beginning of this year, the National Development and Reform Commission (NDRC), the Ministry of Commerce (MOFCOM) and other relevant departments have refined and optimized the consumer goods "trade-in" program. Local governments have implemented targeted measures and tailored services to address specific public demands, thereby continuously unlocking policy dividends. Sales of certain upgraded goods enjoy fast growth. According to reports, as of June 20, sales under this program have exceeded 1 trillion yuan, benefiting 136 million consumers.

Investment in fixed assets is down by 5.7% year on year, but investment in areas such as high-tech and energy infrastructure continues to grow significantly, contributing to China’s high-quality development and the transformation and upgrading of industrial system.

The investment in high-tech industries grew by 4.6% year on year, of which the investment in aerospace vehicle and equipment manufacturing grew by 23.3%, computer and office device manufacturing by 8.1% and information services by 15.5%.

In the first half of the year, against the backdrop of heightened volatility in global energy markets, China's energy system demonstrates notable resilience. Energy infrastructure investment plays a pivotal role in buffering these external shocks. China is investing in wind, solar, hydro and nuclear power in order to accelerate the development of a more resilient energy system.

According to released data, by the end of May, China's cumulative installed power generation capacity reached 4.01 billion kilowatt, reflecting a year-on-year increase of 11% and ranking first globally in scale.

The Chinese economy as a whole maintains a generally stable and steadily improving performance in the first half of the year. As long as domestic demand keeps improving, China's economic development has a basic drive.

Currently, driven by medium to long-term factors such as demographic shifts and technological transformation, China faces a structural mismatch characterized by relative surplus on the supply side and shortage on the demand side. This imbalance remains a central constraint on the smooth functioning of the national economic cycle. In response, the Central Economic Work Conference of 2026 placed "adhering to domestic demand-led growth and building a robust domestic market" at the top of its eight key tasks, explicitly calling to strengthen the domestic circulation and expand new space for domestic demand growth.

Theoretically speaking, the stable operation of a macro-economy means maintaining the dynamic equilibrium between aggregate supply and aggregate demand, which is also the major objective of every government's macroeconomic regulations. In practical terms, however, such equilibrium is merely transient and contingent, whereas disequilibrium is the common phenomenon and the restoration process is gradual in nature.

Looking ahead, with the deepening of the Chinese government's strategy to expand domestic demand, social investment expectations and household consumption propensity are poised for systemic improvement. This will further consolidate the role of domestic demand as the primary engine of economic growth, providing a solid foundation for achieving a high-quality and steady growth throughout the year.

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