China's stable growth and steady price gains bolster global economy

Editor's note: Li Lintong, a special commentator for CGTN, is an assistant professor of economics at the National School of Development, Peking University.

China's July price data offers a timely assessment of economic conditions at the start of the second half of 2026. The consumer price index (CPI) rose 0.5% year on year and declined 0.1% month on month, with the monthly fall narrowing by 0.2 percentage point from June. Core CPI, which excludes food and energy, increased 0.9% year on year and 0.3% month on month. The producer price index (PPI) rose 3.5% from a year earlier but fell 0.7% from June.

The CPI reading remains consistent with moderate price growth, while the rise in core CPI indicates some firmness in underlying demand. The retreat of international crude oil prices from earlier highs, which reduced domestic fuel prices and costs for upstream industrial producers, was a major factor behind the month-on-month declines in both CPI and PPI. This short-term, externally driven adjustment does not change the broader signal of gradual price firming since the beginning of the year.

In the first half, CPI rose by an average of 1.0%, core CPI by 1.2% and PPI by 1.5%. Average CPI growth nevertheless remained below the government's annual indicative target of around 2%. A stronger and better-coordinated fiscal and monetary policy mix would support aggregate demand, broaden price increases across sectors and make the annual target more attainable.

The gradual firming of prices is underpinned by stable economic growth and the increasing contribution of new growth drivers. China's GDP reached 69.57 trillion yuan ($10.31 trillion) in the first half, representing real growth of 4.7% amid an uncertain external environment. Services expanded 5.2%, and value added by industrial enterprises above designated size – enterprises with an annual main business revenue of 20 million yuan ($2.8 million) or more – rose 5.4%. Within industry, high-tech manufacturing grew 13.3% and equipment manufacturing 9.3%. This sectoral composition indicates that stable aggregate growth has been accompanied by continued industrial upgrading.

Industrial profitability provides a complementary measure of demand and operating conditions. In the first six months, revenue at industrial enterprises above designated size increased 6.5%, while total profits rose 18.7% to 3.95 trillion yuan ($585 billion). Their operating-revenue profit margin reached 5.70%, 0.59 percentage point higher than a year earlier and the highest cumulative monthly level since 2024.

Stronger revenue, more favorable cost conditions, and healthier balance sheets also contributed to industrial performance. This improvement has benefited from policies aimed at curbing "involution-style" competition, including excessive price-cutting and duplicative expansion that compress corporate margins. By promoting more orderly market competition, these policies give firms greater scope to invest in research, product quality and technological upgrading, thereby strengthening incentives for innovation.

To interpret investment data by composition, fixed-asset investment declined 5.7% in the first half, but the decrease was 2.7% when real estate development was excluded. Real estate development investment fell 18.0%. In sectors where supply expands faster than demand, slower investment can facilitate inventory adjustment, reduce excessive price competition, and improve the conditions for profitability and property market stabilization.

At the same time, investment continued to move toward activities associated with technological progress and productivity growth. Investment in intellectual property products increased 9.4%, and high-tech industry investment rose 4.6%. This included growth of 23.3% in aerospace equipment manufacturing and 15.5% in information services. The investment slowdown was therefore not uniform; it was accompanied by a reallocation of capital toward sectors with stronger long-term growth potential.

China's stable growth is particularly important as momentum in the global economy weakens. Compared with its January update, the International Monetary Fund (IMF)'s July World Economic Outlook Update lowered its forecast for global growth in 2026 from 3.3% to 3.0%. Over the same period, however, the IMF raised its forecast for China's growth by 0.2% to 4.6%.

The opposite direction of these revisions provides external confirmation of China's underlying economic strength. While the global outlook has dimmed, China's sustained expansion continues to generate demand, investment opportunities and policy predictability, making it an increasingly important anchor for global growth.

Trade is a direct channel through which this contribution reaches other economies. China's goods imports and exports increased 16.9% in the first half. Imports rose 22.1% to 10.74 trillion yuan ($1.59 trillion), converting domestic demand into production and income abroad. Trade with Belt and Road partner countries grew 14.8%. Expansion in high-tech manufacturing and exports of mechanical and electrical products also supports international supply chains and the diffusion of equipment used in digitalization, industrial upgrading and green transition.

The policy implication is twofold. Domestically, stronger fiscal and monetary coordination can reinforce demand and make the upward movement in prices broader and more durable. Internationally, China's stable growth, expanding imports and continued industrial upgrading provide a source of demand and predictability in an uncertain global economy.

The July data is consistent with that broader assessment: Prices are rising moderately, underlying demand is strengthening, and the economy retains both stability and room for further expansion.

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