China's economy grew 4.3% in the three months to June, down from 5.0% at the start of the year and below what the market had expected. A global rush to build out the infrastructure behind artificial intelligence has turned the technology into a rare pocket of growth during one of the country's weakest stretches in years.
Where the growth is hiding
Electronics and information technology did the heavy lifting, contributing over half of the economy's expansion between April and June, according to Capital Economics. In year-on-year terms that came to 1.4 percentage points of the overall 4.3% gain, or roughly a third of it. Earlier estimates from China International Capital Corp put AI-related exports alone at 1.1 percentage points of growth in the first four months of the year, nearly triple their share for all of 2025. Chinese firms are already reckoned to earn 16% of AI-related revenues worldwide, per Goldman Sachs, which counted more than 3,000 companies embedded in a long AI value chain. Peking University's Liu Qiao, who advises the government, put AI-related industries at about 17% of the whole economy.
A new engine, not a cure
The divide shows up in the raw output figures: while nationwide industrial output rose only 5% in the first half from a year earlier, electronics manufacturers jumped 15%. Their capital spending climbed 7%, even as fixed-asset investment overall, the money sunk into factories, property and infrastructure, extended a historic 6% contraction. By June, fixed-asset investment was down 5.7% for the year to date, a steeper drop than forecasters had expected. Bloomberg Economics reckons high-tech and green industries could account for about a fifth of the economy this year, overtaking property-related sectors for the first time.
Not everyone is convinced it lasts. "The emergence of AI as the new engine of Chinese growth could prove to be a key source of economic resilience over the rest of the year and into 2027," said Capital Economics' Julian Evans-Pritchard. Bloomberg Economics' Eric Zhu is cooler: gains from AI will help mitigate, though likely not reverse, China's long-term growth downtrend as a shrinking workforce and de-globalisation bite.
Whether a single industry can keep carrying a slowing economy is the question 2027 will answer.
