China's economic growth slowed sharply to 4.3% on an annual basis in the April-June quarter, the government said Wednesday, marking the weakest period in over three years and during the COVID-19 pandemic.

The weak household consumption clouded strong manufacturing and exports, and intensified concerns over the long-term sustainability of its unbalanced growth model.

At 4.3%, ⁠gross domestic product growth in April-June eased from the first quarter's 5.0%, landing ⁠below the lower end of China's 4.5%-5.0% full-year target and missing forecasts.

China has largely shrugged off wider economic impacts from the Iran war as soaring energy prices pushed up global inflation.

Exports rose 17.6% in the first half of the year from a year earlier, and 27% in June, according to customs data.

Slowest growth since 2022

But domestic spending and investment have lagged, limiting the boost from export manufacturing for an economy that has struggled to regain momentum since parts of China were locked down during the COVID-19 pandemic.

"This was the slowest growth in any quarter since the lockdown-impacted fourth quarter of 2022," said Lynn Song, chief economist for Greater China at ING Bank, in a note.

The data adds pressure on Beijing for more stimulus.

But many analysts say a closely watched end-July meeting of the Communist Party's Politburo, a top decision-making body, may not flag major steps due to concerns over ballooning debt.

Economists also argue ​that the bigger challenge is not the pace of growth but its composition.

Some economists say China's economy is becoming increasingly unbalanced as heavy state support and private investments pour into frontier technologies like AI, computer chips, and robotics, while other areas, such as lower-value manufacturing and job-creating service industries, languish.

Wednesday's data showed retail sales rising 1.0% ​in ⁠June and industrial output expanding 5.3% – suggesting an overwhelming reliance on global demand for manufactured goods at a time when trading partners are complaining about China's imbalances and the Iran war weighs on the world economy.

Jane Hou, who runs a European goods importing business in eastern China, says her income has roughly halved since the beginning of the year as her firm's sales have dropped. An apartment she rents out has been without a tenant for more than six months – a reflection of China's huge housing oversupply and a prolonged property crisis.

"Apart from necessary spending on food, I save on anything I can," said Hou. "I haven't bought a single piece of clothing in six months."

Still, the economy grew 4.7% in January-June, within target, reducing urgency for major stimulus.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, doubts that the Politburo will signal a wider fiscal deficit, given that exports for now remain strong.

"The government seems reluctant to spend fiscal resources and build up debt," said Zhang.

"There is a general consensus among policymakers and researchers that China needs to boost domestic demand. But there is no consensus on how to do it."

China's exports of high-tech products such as electric vehicles, computer chips and other electronic equipment have risen sharply recently since the leaders have made the development of advanced technologies a top priority.

China ran a record $1.2 trillion global trade surplus last year, drawing complaints from policymakers in other countries over their trade imbalances with the world's second-largest economy.

Investment weakens, consumption soft

Domestically, wages have not kept pace with the ⁠overall economy, ⁠even declining in some sectors.

Industrial overcapacity, U.S. tariffs and price wars among producers have fuelled layoffs in factories, while weak demand and faster AI adoption have slowed white-collar job creation.

The property downturn has eroded household wealth and curbed employment in construction since 2021. The data showed property investment contracting 18% year-over-year in the first six months, while home prices also eased.

Investment is also slowing.

China's fixed-asset investment shrank 5.7% year-over-year in January-June, with even state-sector investment dropping 2.3%.

"The primary drag on the headline growth figure stems from a deepening downturn in domestic investment activity," said Andy Ji, an analyst at ITC Markets.

"Overall, a high-tech-driven ​industrial engine running alongside cratering domestic consumption and investment firmly highlights the economy's deeply uneven growth momentum."

Exports hold strong

The onus is increasingly on exports to drive ​growth.

Trade data on Tuesday showed external demand is so far compensating for China's internal weakness, with exports beating expectations with a 27% jump, riding the global AI boom.

This partly reflected frontloading by U.S. retailers looking to secure inventories for Black Friday and Christmas holiday sales before expected tariff hikes later this ⁠year, shipping executives have said.

U.S. ‌President Donald Trump's ‌visit to China in May preserved the detente between the world's two largest powers, but their trade relationship remains fragile.

A ⁠universal 10% U.S. tariff imposed by Washington in February, after the Supreme Court declared some earlier tariffs illegal, ‌expires on July 24, but it is widely expected to be replaced with higher levies.

The U.S. Trade Representative has proposed a 12.5% tariff on imports from China and elsewhere following an investigation into forced labor, ​which Beijing denies, with a final decision expected in the coming ⁠months.

Moreover, the European Union, whose trade deficit with China averaged $1 billion a day last year, is working on bolstering protections of ⁠its industrial complex from Chinese competition.

At the same time, renewed conflict between the U.S. and Iran fuels uncertainty over global growth.

Larry Hu, Macquarie Group's chief China economist, said Beijing has little ⁠incentive to lean off external demand ​for now.

"What will cause the current situation to change is when exports fail," Hu said.

"When exports slow down, in order to still achieve the growth target, the government will do more on domestic demand."