China's export-oriented industries and policy-backed investment are helping offset weak domestic demand and sluggish private-sector activity, according to Fitch Ratings. While the country's economy has maintained resilient growth in the first half of 2026, the agency says widening gaps between export-driven and domestic sectors continue to shape its economic outlook.
Exports, AI investment drive economic resilience
China's economy expanded by 4.7 per cent in the first half of 2026, supported largely by export-focused industries and targeted policy measures, Fitch Ratings said.
According to the report, the country's economic performance is becoming increasingly divided between sectors benefiting from global demand and industries primarily dependent on domestic consumption.
Greening the Future #
23 Jul 2026 - Vol 05 | Issue 30
Securing a sustainable India
Read Now Greening the Future Export-oriented industries—including electric vehicles, batteries, advanced manufacturing and parts of the technology supply chain—continue to perform strongly due to sustained international demand.
Fitch also said that investment linked to artificial intelligence is emerging as another important growth driver. Spending on computing infrastructure, data centres and electricity supply is supporting broader industrial activity while strengthening China's industrial upgrade.
The ratings agency further highlighted the growing strategic importance of a reliable power supply, describing it as essential for both China's energy security and the continued expansion of AI infrastructure.
Domestic demand remains under pressure
Despite strong export performance, domestic-facing sectors continue to face significant challenges.
Fitch said household consumption remains constrained by weak labour-market conditions, subdued consumer confidence and the prolonged correction in the property market. Private-sector investment has also remained sluggish.
According to the report, excess industrial capacity and intense competition are putting pressure on pricing power and corporate profit margins across several domestic industries.
The agency added that weaker income expectations, combined with continued weakness in the property sector, have further undermined household confidence, prompting consumers and businesses to remain cautious about spending and investment.
Trade risks cloud long-term outlook
Fitch said China's broader macro-financial environment remains supportive, aided by accommodative monetary policy, targeted fiscal measures and continued management of capital flows, which have helped contain volatility despite geopolitical uncertainty and higher energy prices.
However, the agency warned that the durability of China's export-led growth remains uncertain.
According to Fitch, rising trade frictions, tariff risks and slowing global demand could test the resilience of the country's export-oriented industries in the coming months.
The report noted that any weakening of the external growth engine could increase pressure on domestic demand and require stronger policy support to maintain economic momentum.
It concluded that China's export sector and ongoing industrial upgrading have become increasingly important pillars of economic growth as domestic consumption, private investment and the property market continue to grapple with structural challenges.
(With inputs from ANI)