China's economy grew 4.5% in third quarter on strong exports

China's official data showed on Monday that the world's second-largest economy grew 4.5% in the July–September quarter compared with a year earlier. The figure beat expectations and was up from 4.3% in April–June, the slowest pace in more than three years. It brings the country closer to its 2026 target range of 4.5%–5%; growth last year was 5%. Earlier this month the International Monetary Fund (IMF) cut its forecast for China's 2026 growth to 4.5%, the bottom of Beijing's range.

Exports carry the growth

Exports are one of the few strong drivers. They jumped 36% in September, and the January–September trade surplus reached $938 billion, putting China on course to exceed last year's record of $1.2 trillion. Higher US tariffs have reduced bilateral trade, so Chinese exporters have turned to Southeast Asia, Latin America and Europe. High-tech goods, including semiconductors and hybrid and electric vehicles, lead the expansion.

Data from the China Association of Automobile Manufacturers show about 919,000 passenger vehicles were shipped abroad in September. In the first nine months, exports topped 7.1 million, more than 70% above the same period a year earlier.

Weak domestic demand

Domestic demand has softened as a property slump lasting several years has eroded household wealth and pushed up savings. Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management, said the tech-driven, export-reliant model has produced limited job and income gains. Max Zenglein, Asia Pacific senior economist at The Conference Board, said the headline figure is an increasingly poor indicator of the broader economy and hides widening disparities across industries, regions and households.

Pressure from the EU

The European Union runs a deficit with China of more than $1.1 billion a day, and Chinese exports to the bloc rose 16% in the first nine months. This month the EU agreed to cap Chinese hybrid vehicle imports at 350,000 a year, though some member states want further curbs. Lynn Song, chief economist for Greater China at ING, said trade imbalances will be difficult to resolve quickly. Central bank governor Pan Gongsheng said last Friday that deficit and surplus countries should cooperate and that China is committed to expanding domestic demand.