The Chinese economy is slowing down, but the crackdown is not

The Chinese economy slowed more than expected in the second quarter of 2026. According to the National Bureau of Statistics in Beijing, China’s GDP grew by 4.3 per cent year-on-year, falling short of analysts’ expectations (who had forecast at least 4.5 per cent) and down from the 5 per cent recorded in the first quarter. This is the lowest quarterly growth rate since the end of 2022, when the country was emerging from the ‘Zero Covid’ policy imposed by the Beijing leadership, and is also below the official target set for the current year – between 4.5 and 5 per cent – which was, in any case, the lowest target since 1991. 

For years now, the leadership in Beijing has been trying to downplay the most worrying economic data. As early as 2023, at the Central Economic Work Conference, Chinese leader Xi Jinping had emphasised the need to “strengthen economic propaganda and guide public opinion, extolling the bright future of the Chinese economy”. Shortly afterwards, the Ministry of State Security published an article on its WeChat profile about economic security – defined as an integral part of national security – in which it accused certain “pessimistic forces” of seeking to undermine the system and the path of socialism “with Chinese characteristics”. Since then, mentioning the slowdown in the Chinese economy has been risky, to the extent that in recent years there have been several cases of commentators and academics facing online censorship and repression for sharing their concerns about the Party’s economic strategy. The most high-profile case is that of Zhu Hengpeng, then director of the Institute of Economics at the Chinese Academy of Social Sciences, who was arrested in 2024 for criticising Xi’s economic policies in a private group chat.

The Chinese property crisis has triggered a series of domestic crises, including a deflationary spiral, domestic consumption in freefall, and high unemployment – in January two years ago, the Chinese National Bureau of Statistics decided to stop publishing youth unemployment figures in order to improve the statistics. In an attempt to revive the economy, Beijing has focused primarily on exports, which drive growth but are of little use domestically. According to some commentators, the fact that it was the National Bureau of Statistics itself that reported such downwards-revised figures suggests that the leadership may also be aware of the emergency, and that possible structural reforms and new stimulus measures may be on the way.

“The slowdown in Chinese growth does not signal the failure of Beijing’s industrial strategy, but reveals its structural limitations,” Enrico Fardella, a lecturer at the University of Naples L’Orientale, tells Il Foglio. This is because China “continues to increase its production capacity in technologically advanced sectors without a corresponding rise in income, making growth increasingly dependent on exports”. According to Fardella, who co-authored the essay “China is sabotaging the world that enables its rise” with his colleague Sergey Radchenko in *Foreign Affairs* the day before yesterday, “for over a decade this imbalance has been offset by the expansion of debt and investment, particularly in the property sector”. Today, however, “that engine is running out of steam”, and Beijing “is forced to rely increasingly on foreign markets”. These markets, especially the European one, are attempting to curb Chinese trade expansionism, though not without difficulty. But it is above all here that, according to Fardella, the fundamental contradiction emerges: “The more China seeks to sustain its growth by expanding trade surpluses and consolidating its industrial dominance, the more it fuels protectionist reactions from the United States, Europe and a growing number of emerging economies, thereby restricting access to the markets on which it continues to depend. The slowdown in growth therefore reflects not a loss of China’s productive capacity, but the fact that the development model which fuelled its rise is gradually eroding the international conditions that made its success possible. This is the great contradiction of contemporary China: to continue growing, it needs the openness of the economic order which, in pursuing its own industrial dominance, is increasingly contributing to its fragmentation.”