China’s H1 Economy: Four Key Indicators Signal Recovery
China’s economy demonstrated notable resilience in the first half of 2026, with four key indicators pointing to a steady recovery amid global uncertainties, according to a front-page analysis published July 8 by People’s Daily. The report, also carried by Xinhua News, highlights how the world’s second-largest economy is navigating global energy volatility, shifting trade dynamics, and domestic structural transformation.
Power Generation Capacity Surpasses 4 Billion kW
As of the end of May, China’s total installed power generation capacity reached 4.01 billion kW, up 11.0% year-on-year — the highest in the world. The pace of expansion has accelerated dramatically: reaching the first billion kW took 8 years, the second took 4 years and 4 months, and the most recent billion was added in just two years.
China now produces approximately 80% of the world’s photovoltaic modules and 60% of its wind power equipment. Jiang Debin, Deputy Director of the Statistics and Digital Intelligence Department at the China Electricity Council, noted that ultra-high-voltage transmission, pumped storage, and new energy storage capabilities are being accelerated to ensure new installations can be “built, transmitted, and absorbed.”
This energy infrastructure strength proved critical as global energy markets experienced severe volatility in the first half of the year, with China’s system maintaining overall supply-demand balance.
Daily AI Token Calls Reach Hundreds of Trillions
China’s artificial intelligence sector has experienced explosive growth. As of the end of May, daily token calls — the fundamental unit of AI model processing — reached hundreds of trillions, leading globally. This marks a dramatic acceleration from 100 billion daily calls in January 2024 to 100 trillion by the end of 2025.
Huo Jinjie, President of IDC China, projects that China’s generative AI market will approach $100 billion by 2029, with a compound annual growth rate of 68% from 2024 to 2029, making it one of the world’s most active AI application markets.
High-tech manufacturing contributed nearly 40% of industrial growth in the first five months of 2026, while equipment manufacturing contributed approximately 60%, according to CCTV’s analysis. Investment in high-tech industries rose 4.5%, with integrated circuit manufacturing up 11% and lithium battery manufacturing surging 24.9%.
Consumer Trade-in Sales Exceed 1 Trillion Yuan
China’s consumer goods trade-in program has proven remarkably effective. As of June 20, sales under the scheme exceeded 1 trillion yuan, benefiting 136 million person-times. The subsidy leverage ratio improved from 1:7.8 in 2025 to 1:10.3, meaning each yuan of subsidy generated 10.3 yuan in sales.
Smart glasses were included in the subsidy scope for the first time, with retail sales of smart glasses and wearables more than doubling year-on-year. High-efficiency home appliance retail sales grew over 30%, while new energy vehicle (NEV) penetration rates reached 61.4% in April and 62.9% in May — exceeding 60% for two consecutive months and setting new records.
China-Africa Trade Breaks 1 Trillion Yuan in H1
Trade between China and Africa reached 1.14 trillion yuan in the first five months of 2026, up 18.2% year-on-year — the first time it has exceeded 1 trillion yuan in a half-year period. This milestone follows China’s implementation of a zero-tariff policy on all 53 African countries with diplomatic relations, effective May 1, making China the first major economy to take such a step.
China has now been Africa’s largest trading partner for 17 consecutive years. Wang Haiguang, Deputy General Manager of the Overseas Division at Zhejiang Zhongzhe New Energy, noted that zero tariffs will attract more Chinese companies to establish factories in Africa, creating an increasingly complete ecological chain encompassing recycling, skills training, and after-sales service.
Overall, China’s goods trade in the first five months reached 20.68 trillion yuan, up 15.3% year-on-year, with 25,297 new foreign-invested enterprises established — a 5.3% increase.
Broader Economic Context
The four indicators sit within a broader picture of stability. Q1 2026 GDP grew 5.0% year-on-year. The surveyed urban unemployment rate stood at 5.1% in May, down 0.1 percentage points from April. Consumer price inflation remained moderate at 1.0% year-on-year for January through May.
However, challenges remain. China’s foreign exchange reserves declined by $26 billion in June to $3.4163 trillion, driven by U.S. dollar strength, according to the State Administration of Foreign Exchange. The central bank continued its gold accumulation strategy for the 20th consecutive month, adding 480,000 ounces in June to reach 75.4 million ounces.
What to Watch
As the “15th Five-Year Plan” (2026-2030) enters its second half, analysts will be watching for full H1 GDP data expected later in July, the trajectory of youth unemployment, and how the real estate sector — notably absent from the headline indicators — performs. The effectiveness of China’s dual-circulation strategy, balancing domestic consumption with international trade diversification, will remain a key theme for the remainder of the year.