China’s economic expansion slowed markedly from April to June, as subdued domestic demand and the effects of the Iran conflict on oil prices weighed on the economy, despite robust export performance.

Official gross domestic product (GDP) data indicated that the world’s second-largest economy grew by 4.3% in the second quarter, falling short of Beijing’s yearly target and down from the 5% growth recorded in the first quarter.

The figures were released a day after separate statistics showed that Chinese exports surged by 27% in June compared with the same month last year.

In March, authorities lowered the annual growth target to between 4.5% and 5%, marking the weakest expansion goal since 1991. Some analysts believe this adjustment has allowed policymakers to more openly recognise existing economic fragility.

This latest release covers the first complete quarter since the Iran conflict began on 28 February and represents the slowest quarterly growth since late 2022, when China was emerging from strict Covid-19 controls.

China’s National Bureau of Statistics acknowledged in a statement accompanying the data that external conditions have become more unstable and uncertain.

The agency also pointed to a mismatch within the domestic economy, highlighting strong production levels alongside relatively weak consumer demand.

Additional figures published on Wednesday underscored the challenges facing policymakers, including a prolonged downturn in the property sector and cautious household spending.

New home prices declined again, though the 0.1% drop in June was slightly milder than the fall recorded in May.

Retail sales, however, edged up by 1% in June, a turnaround from the 0.6% decline seen the previous month.

Fabien Yip, a market analyst at investment platform IG, said businesses are shouldering higher costs for energy and raw materials because consumer demand remains too soft to pass those increases on.

She added that the longer the Iran conflict continues, the more difficult it will be for companies and policymakers to manage these pressures.

Julian Evans-Pritchard, head of China economics at Capital Economics, suggested that the apparent slowdown may reflect a shift in the official growth target rather than a sharp change in underlying conditions, giving authorities greater latitude to acknowledge economic realities.

He noted that the updated figures align more closely with independent estimates of China’s growth trajectory.

According to him, the data should not necessarily be viewed as evidence of a sudden and dramatic downturn, especially as June’s indicators showed signs of improvement across several areas.

Customs data released on Tuesday revealed that exports of technology products were driven higher by strong global demand for semiconductors used in artificial intelligence data centres.

Rising overseas appetite for Chinese electric vehicles also provided a significant lift, with monthly car exports exceeding one million units for the first time on record.