China’s economy accelerated in the July-September quarter on robust exports

China said Monday its economy grew 4.5% in the July-September quarter from a year ago fueled by robust exports, moving closer to meeting its official annual growth target for the year as trading partners seek to balance their trade deficits with the country.

Economic growth accelerated from the 4.3% year-on-year rate recorded in the April-June quarter, the slowest expansion in more than three years. Its economy expanded 4.6% in the first three quarters.

For the whole year, Chinese leaders have set a growth target of 4.5% to 5%, down from last year’s 5% expansion. Earlier this month, the International Monetary Fund trimmed its forecast for China’s 2026 economic growth to 4.5%, the lower end of Beijing’s goal.

“Domestic demand was weak, while trade grew strongly,” said Dave Chia, an economist at Moody’s Analytics. Exports will likely stay strong but global trade barriers remain a risk, he said.

Exports are strong, but domestic sluggishness remains

China’s domestic demand has been weighed down by a yearslong downturn in its property market.

The headline official growth figure is becoming “an increasingly poor indicator of how the broader economy is performing,” said Max Zenglein, Asia Pacific senior economist at The Conference Board.

That’s because it masks “widening disparities across industries, regions, and households,” Zenglein said. Beijing faces difficult trade-offs and managing domestic imbalances may prove more challenging than dealing with external pressures, he added.

On Monday, Mao Shengyong, deputy head of China’s National Bureau of Statistics, cautioned of the economic challenges ahead. “The international environment is complex and volatile, the problem of insufficient domestic demand remains relatively prominent and the foundation for a stable, improving economy still needs consolidation,” he told a news conference.

With exports being one of the few bright spots, China is on track to surpass last year’s record $1.2 trillion trade surplus globally, after logging a 36% growth in exports last month and already a $938 billion surplus between January and September.

Elevated U.S. tariffs have hit some U.S.-China bilateral trade and forced China to look elsewhere, including Southeast Asia, Latin America and Europe. High-tech exports such as semiconductors and autos, including hybrid and electric vehicles, are among areas driving its export growth this year.

As China pursues self-sufficiency to help shield itself from Western export controls and trade uncertainties, it has built up massive domestic manufacturing capacities across industries such as solar and EVs, which are heavily subsidized by the government. But output was scaled up rapidly at a time of weakened domestic consumption, so many of these goods are shipped to overseas markets at competitive prices.

An export-reliant growth model that’s highly tech-driven has shown limited job creation and broad income gains while risks of artificial intelligence-driven labor displacements continue to grow, said Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management.

Source: Apnews