AI Sector Accounts for a Third of China's GDP Growth in Second Quarter

China's economy grew more slowly than forecast in the second quarter of 2026, but the data shows the slowdown would have been far steeper without the artificial intelligence boom. According to calculations by Capital Economics, the broadly defined information and communications technology sector, driven above all by demand for AI-related chips and hardware, contributed 1.4 percentage points to annual GDP growth, roughly a third of the country's entire economic expansion.

Second-quarter numbers

The slowdown from 5.0 to 4.3 percent year-on-year was worse than market expectations and confirmed that the traditional pillars of Chinese growth, construction, real estate and consumer goods exports, are losing momentum. Capital Economics found, however, that over the same period the ICT sector grew at a pace clearly outstripping the rest of the economy, with its share of overall growth the largest in years.

On a quarterly basis, annualized economic growth came in at 3.6 percent, of which as much as 2.0 percentage points, more than half, came from tech industries. That means the rest of the economy, outside the AI and electronics sector, grew at a pace far lower than the aggregate statistics suggest.

Where the growth comes from

The main driver is semiconductor and computer hardware production. China supplies the global market with so-called mature-node chips and the infrastructure needed to build AI data centers, and foreign demand for these components is growing faster than domestic consumption. Capacity utilization in electronics has reached its highest level since the pandemic.

Capital Economics notes that continued growth in output and value added in the ICT industry, despite another decline in employment in the sector, is a clear signal that artificial intelligence is genuinely boosting productivity rather than just driving up stock valuations. The firm assesses that the AI boom, which has fueled tech stock prices for several years, has finally fully translated into hard economic data.

What weakened

Outside electronics, industrial output in other areas slowed markedly. Analysts point to, among other things, a decline in production of refined fuels and petrochemicals, partly linked to turmoil around oil supplies from Iran. Domestic household consumption is also weakening, and the real estate sector remains stuck in a multi-year slump that has not eased despite successive support programs from the government in Beijing.

In other words, artificial intelligence is not solving China's structural economic problems, it is just masking them in the aggregate GDP figures. Without the ICT contribution, this year's growth rate would be closer to three percent than the officially reported 4.3 percent, which is already below the government's target.

Risk of a single engine

Analysts warn against letting growth become overly dependent on a single industry. Memory chip production is already approaching the limits of current manufacturing capacity, which could constrain further expansion in the coming quarters. At the same time, several new memory plants are under construction and expected to come online within the year, boosting production capacity by more than a third, which should sustain the sector's growth pace in subsequent periods.

For the global market, this dynamic matters beyond China's scale alone. The country remains a key supplier of components for the world's AI infrastructure, and any slowdown or acceleration in its chip and hardware production feeds through to prices and availability of parts for companies building data centers around the world, including in Europe.

For Polish companies and investors watching the Chinese market, the takeaway is simple: China's GDP figures now need to be read alongside data on electronics production and AI-related exports, since it is that part of the economy that determines whether official growth indicators have any chance of approaching government targets.