China’s July price data provides a timely snapshot of economic conditions at the beginning of the second half of 2026. The consumer price index (CPI) increased 0.5 per cent year on year and fell 0.1 per cent month on month, with the month-on- month decline narrowing by 0.2 percentage points from June. Core CPI, which excludes food and energy prices, rose 0.9 percent year on year and 0.3 percent month on month. The producer price index (PPI) rose 3.5 percent from a year earlier, but fell 0.7 percent from June.
The CPI reading is consistent with moderate price growth, while the rise in core CPI indicates some firmness in underlying demand. A key factor behind the month-on-month declines in both CPI and PPI was the retreat of international crude oil prices from earlier highs, which reduced domestic fuel prices and costs for upstream industrial producers. This short-term adjustment, driven externally, does not change the broader signal of gradual price firming since the beginning of the year.
In the first half, CPI increased by an average of 1.0 per cent, core CPI 1.2 per cent and PPI 1.5 per cent. CPI inflation on average, however, stayed below the government’s annual indicative target of about two per cent. A more robust and better-coordinated fiscal-monetary policy mix would support aggregate demand, spread out price increases across sectors and make the annual target easier to achieve.
The gradual firming of prices is supported by stable economic growth and the growing contribution of new growth drivers. China’s GDP reached 69.57 trillion yuan ($10.31 trillion) in the first half, with real growth of 4.7 per cent amid an uncertain external environment. Services rose 5.2 per cent, and value added by industrial enterprises above designated size – enterprises with an annual main business revenue of 20 million yuan ($2.8 million) or more – increased 5.4 per cent. High-tech manufacturing within industry rose 13.3 per cent and equipment manufacturing 9.3 per cent. This sectoral composition points to continued industrial upgrading along with stable aggregate growth.
Industrial profitability is a complementary measure of demand and operating conditions. Revenue at industrial enterprises above designated size rose 6.5 per cent in the first six months, while total profits climbed 18.7 per cent to 3.95 trillion yuan ($585 billion). Their operating-revenue profit margin was 5.70 per cent, 0.59 percentage points higher than a year earlier and the highest cumulative monthly level since 2024.
Industrial performance was also boosted by stronger revenue, more favorable cost conditions and healthier balance sheets. This improvement has been helped by policies aimed at curbing “involution-style” competition, such as excessive price-cutting and duplicative expansion that squeeze corporate margins. These policies foster more orderly market competition, providing firms with more room to invest in research, product quality and technological upgrading, which in turn boosts incentives for innovation.
Interpreting investment data by composition, fixed-asset investment fell 5.7 per cent in the first half but the fall was 2.7 per cent excluding real estate development. Real estate development investment dropped by 18.0 per cent. In sectors where supply grows faster than demand, slower investment can help inventory adjustment, cut excessive price competition, and enhance the conditions for profitability and property market stabilization.
China’s steady growth and moderate price gains support global economy
At the same time, investments continued flowing to activities associated with technological progress and productivity growth. Investment in intellectual property products grew 9.4 percent and investment in the high-tech industry rose 4.6 percent. Aerospace equipment manufacturing grew 23.3 percent and information services 15.5 percent, among others. The investment slowdown was therefore not uniform but was accompanied by a reallocation of capital toward sectors with stronger long-term growth potential.
The stability of China’s growth is particularly important at a time when momentum in the world economy is slowing. In its July World Economic Outlook Update, the International Monetary Fund (IMF) cut its forecast for global growth in 2026 from 3.3 per cent to 3.0 per cent, compared with its January update. But over the same period the IMF has lifted its forecast for China’s growth by 0.2 percentage points to 4.6 per cent.
The reverse direction of these revisions offers external validation of China’s underlying economic strength. The global outlook has darkened but China’s sustained expansion continues to produce demand, investment opportunities and policy predictability, making it an increasingly important anchor for global growth.
This input is transmitted directly to other economies via trade. China’s import and export of goods rose 16.9 per cent in the first half. Imports rose by 22.1 per cent to 10.74 trillion yuan ($1.59 trillion), turning domestic demand into output and income abroad. Trade with countries involved in the Belt and Road Initiative grew 14.8 per cent. Expansion in high-tech manufacturing and exports of mechanical and electrical products also support international supply chains and diffusion of equipment used in digitalization, industrial upgrading and green transition.
The policy implication is twofold. Stronger fiscal and monetary coordination at home can reinforce demand and make the rise in prices broader and more durable. Internationally, China’s stable growth, expanding imports and ongoing industrial upgrading offer a source of demand and predictability in a global economy that is facing uncertainty.
The July data are consistent with that broader assessment: Prices are rising moderately, underlying demand is strengthening, and the economy remains both stable and capable of further expansion.
Editor’s Note: This article is extracted from the China Global Television Network (CGTN), and the author, Li, an Assistant Professor of Economics at the National School of Development, Peking University, Beijing, China, is a special commentator for CGTN.