China's premier calls for stabilising external demand as growth sputters

China's Prime Minister Li Qiang urged on Monday for measures to stabilize external demand and broaden international trade collaboration, as sluggish domestic demand is hampering growth and heightening external risks. At a state council meeting, Li stressed that insufficient domestic demand remains a key issue, with certain industries and businesses facing mounting challenges and mounting uncertainties in the external environment.

Despite relying heavily on exports to fuel growth and compensate for domestic demand weakness, China's second-largest economy is exposed to potential threats from trade disputes and the ongoing conflict in the Middle East, which could adversely impact global demand for Chinese products.

Economic figures released on Monday revealed that growth continued to lag in July, with industrial output and retail sales decelerating, following a three-and-a-half-year low in the April-to-June period. Second-quarter GDP growth of 4.3% fell short of Beijing's 4.5% to 5.0% target for the full year. Nevertheless, robust exports of goods have been a crucial driver of growth, as global investment in AI infrastructure has driven demand for Chinese high-tech products, driving up the prices of chips and other AI-related goods.

During the meeting, Li pledged to strive to achieve the annual economic development objectives. He emphasized the need to actively stabilize external demand, foster mutually beneficial international economic and trade cooperation, and promote balanced trade development. Li did not specify how the government would stabilize external demand, but reiterated commitments to utilize existing policies and introduce practical and effective new policies as needed.

He highlighted expanding domestic demand as a strategic priority, calling for boosting employment and income growth, supporting investment in emerging industries, and developing innovative financing mechanisms to attract private investment in infrastructure.