Chinese Academy of Social Sciences Issues Q2 2026 Macro-Financial Report, Highlights Challenges and Investment

The economy currently faces challenges including a slow pace of aggregate demand recovery, emerging structural divergence, real estate market adjustment, and external financial volatility.

The deep-seated causes of the current structural economic divergence include: the pains of transition during the shift from old to new growth drivers, with rapid expansion in new sectors coexisting with contraction in traditional industries; the current PPI recovery being driven mainly by external supply shocks, with raw material prices rising faster than finished goods prices, persistently squeezing profits of small and micro enterprises in the midstream and downstream; imbalances in income distribution, asset shrinkage and slower income growth for middle- and low-income groups; and valuation divergence between technology and traditional sectors in financial markets, amplifying real economy divergence through wealth effects and financing channels.

At the end of the second quarter, as the Federal Reserve signaled a tighter policy stance, profit-taking emerged in high-valuation technology stocks, and volatility increased in major global stock markets.