China's economy is facing the risk of stagnation with downside risks to growth becoming more elevated than a few months ago, IHS Global Insight Senior China Economist Xianfang Ren said in an analysis of the country's second quarter gross domestic product outcome.
The GDP data indicate the economy is facing the risk of slowing to a stalling speed, Ren said. The output growth has been staying under 8 percent for five straight quarters, which is "a clear sign of distress," she added.
The economist expressed concern over the rather significant downslide of investment growth, led by real estate investment. "The construction sector could see lots of headwinds coming forth in the second half, if there is no marked change in policy course," she said.
The rather sharp growth deceleration and the recent financial market turmoil indicate that risks have been building on both the financial and real goods sector, Ren noted.
The reaction of the leadership to the slowdown is still a far cry from the outright stimulus response by the former administration back in May last year, she pointed out.
One main policy thrust this time around is restructuring and realignment of financial resources, with a focus on the reining-in of the shadow banking activities. "The realignment of financial resources, if implemented successfully, could hopefully not just defuse the financial market bomb, but also provide some liquidity boost to the real economy," Ren said.
"The payoff from such financial consolidation efforts will most likely show up in the medium and long-term, even if implemented successfully," she added.
The firm expects China's growth to even slip even further to below 7.5 percent in the second half and whole-year growth to come in just around the target or lower with huge uncertainties remaining with domestic construction sector and external demand.
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May 08, 2026 15:50 ET Manufacturing and services sector survey results and labor market data from main economies were the highlight on the economics news front this week. Factory orders and jobs report dominated the news flow in the U.S. Similarly, industrial production data from German garnered attention in Europe. In Asia, purchasing managers’ survey results from China and the central bank decision from Australia were in focus.