China’s rapid growth in artificial intelligence, electric vehicles, semiconductors and other high-tech industries is helping support parts of the economy, but it has not been enough to stop a broader slowdown.

Weak domestic demand, a prolonged property crisis and softer investment continue to weigh on overall economic activity. China’s economy grew 4.3% year-on-year in the second quarter of 2026, slowing from 5% growth in the first quarter.

It was the weakest quarterly growth rate since late 2022 and highlighted the growing gap between the country’s advanced technology sectors and the wider economy.

The technology sector has remained one of the strongest areas. China’s high-tech manufacturing output grew 13.3% in the first half, while exports of mechanical and electrical products increased 20.1%. Strong global demand for AI-related products, semiconductors and computing equipment has helped China’s exporters offset some weakness at home.

However, consumer spending remains a major concern. Retail sales increased only 1% in June, while China’s property market continues to struggle. Fixed-asset investment also declined during the first half of the year, showing that businesses and households remain cautious about spending and investment.

The weakness has continued into the third quarter. China’s manufacturing PMI fell to 49.2 in July, moving below the 50 mark that separates expansion from contraction. July data also showed continued pressure on consumer demand and the property sector.

China’s booming technology and export industries are therefore creating an increasingly uneven economic picture. Advanced manufacturing is expanding rapidly, while traditional sectors such as property, construction and consumer-facing businesses remain under pressure.

For policymakers, the challenge is to turn the strength of high-tech industries into broader economic growth. Without stronger household consumption and a recovery in property and investment, China’s technology boom may continue to cushion the slowdown without being strong enough to reverse it.

Tired of missing hot stocks? Tradz by EquityPandit provides powerful tools like stock scans and more help you make informed trading decisions. Download now and take control of your portfolio!