China’s economy picks up in June on rebounding exports

China's economy showed signs of recovery in June after two months of weakness, with factory activity accelerating and US-bound export orders posting sharp year-on-year gains, according to the China Beige Book's survey of 1,321 businesses conducted from June 1 to 22.linkedin+2

"Manufacturing saw the clearest improvement. Retail sales recovered nicely," the China Beige Book reported on Monday.linkedin

The pickup follows a difficult stretch for the world's second-largest economy. Retail sales fell 0.6% year-on-year in May — the first decline since December 2022 — while manufacturing investment slipped 0.4% in the January-to-May period and urban fixed-asset investment contracted 4.1%, according to data from China's National Bureau of Statistics.cnbc+1

Export Surge Cushions Domestic Weakness

Exports to the United States surged 11.3% in April and 35.4% in May year-on-year, as businesses rushed to ship goods ahead of potential tariff increases. The broader export picture has remained a bright spot, with double-digit growth in both months fueled largely by demand in the renewable energy and artificial intelligence sectors.intellectia+1

Goldman Sachs The Goldman Sachs Group, Inc. ↗ 1.61% revised its third-quarter GDP growth forecast for China upward to 5% from 4.5%, citing lower oil prices and accelerated fiscal spending as additional tailwinds.intellectia

Recovery Built on Fragile Ground

Despite the June improvement, analysts remain cautious. China's official manufacturing purchasing managers' index is expected to edge up to just 50.1 in June from May's flat reading of 50.0, according to a Reuters poll of 23 economists — barely above the threshold separating expansion from contraction.money.usnews

Industrial profits grew 21.1% year-on-year in May, slower than April's 24.7% pace but still robust, underscoring the widening gap between a resilient factory sector and sluggish domestic consumption. The real estate sector continues to weigh heavily, with development investment plunging 16.2% in the first five months of the year.reuters+2

The Path Ahead

Beijing set an annual growth target of 4.5% to 5% for 2026, the lowest since 1991. Whether the June rebound represents genuine momentum or a temporary bounce depends on whether the improvement sustains through July and August, when second-quarter GDP data and further policy signals from authorities are expected. Economists anticipate the government may consider additional measures to stabilize consumption after the GDP release in mid-July.fortune+2