The Chinese economy will likely lose momentum over the next six to nine months: weak demand for credit, a protracted real estate market crisis, and slowing exports will outweigh an acceleration in budget spending, analysts at BCA Research believe.
Economic activity slowed sharply in the second quarter amid weakening investment and domestic demand. It is expected that at the Politburo meeting at the end of July, the authorities will speed up the implementation of measures that have already been approved, rather than announce large-scale economic stimulus.
By the end of June, only 43% of China’s 11.9 trillion yuan government bond issuance quota had been used, meaning that about 6.8 trillion yuan remains available for the second half of the year. An additional 800 billion yuan under targeted financing is expected to support spending on AI infrastructure, advanced manufacturing, and power grids.
The financial position of local governments remains a limiting factor. In the first five months of 2026, land-sale revenues fell by nearly 30%, increasing the risk of budget spending shortfalls.
Monetary policy is also expected to remain unchanged: no rate cuts or reserve requirement reductions are anticipated this year. Weak credit growth reflects limited demand for borrowing rather than a lack of liquidity, while record-low bank margins constrain the central bank’s ability to cut rates.
Exports should continue to support growth, although their contribution is likely to decline as global manufacturing orders weaken and tariffs on Chinese electric vehicles, batteries, and other strategic goods increase.
Investments in real estate, according to forecasts, will remain negative throughout 2026. Prices have stabilized in several major cities; however, high housing inventories, weak developer balance sheets, and restrained household expectations regarding income limit prospects for a recovery in the market nationwide.
The development of artificial intelligence in China offers more optimistic prospects. The Kimi K3 model from Moonshot AI, according to available data, ranks third in the world, and leading Chinese models are 40–70% cheaper than comparable U.S. counterparts. Lower computing costs may support cloud providers and AI-based application developers, while simultaneously reducing model creators’ margins.
The investment position implies an overweight of Category A stocks in emerging-market portfolios and global portfolios over the six- to twelve-month horizon; however, it is not recommended to add exposure at current valuations. Chinese offshore-listed equities maintain a neutral status, and the USD/CNY pair is forecast to trade in the range of 6.70–6.85 through the end of the year.