China’s economy grows 4.5% in third quarter on strong exports

China’s economy grew 4.5% year-on-year in the July-September quarter, driven by robust exports, bringing the country closer to meeting its annual growth target as trading partners push to reduce their trade deficits with Beijing.

The expansion exceeded expectations and accelerated from the 4.3% growth recorded in the April-June quarter, which was the slowest in more than three years.

Chinese leaders have set a growth target of 4.5%-5% for the full year, down from 5% last year. Earlier this month, the International Monetary Fund lowered its forecast for China’s economic growth in 2026 to 4.5%, the bottom end of Beijing’s target.

“Domestic demand was weak, while trade grew strongly,” said Dave Chia, an economist at Moody’s Analytics, adding that exports were likely to remain strong, although global trade barriers posed a risk.

Despite the headline growth figures, economists warned that persistent weakness in domestic demand and uneven performance across sectors continued to weigh on the broader economy.

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

He said the figure masked “widening disparities across industries, regions, and households”, adding that addressing domestic economic imbalances could prove more difficult for Beijing than managing external pressures.

China’s domestic demand has been constrained by a prolonged property market downturn, which has eroded household wealth and encouraged people to save rather than spend.

Mao Shengyong, deputy head of China’s National Bureau of Statistics, also cautioned about the 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 on Monday.

Strong exports remain one of the economy’s few bright spots. China is on course to surpass last year’s record global trade surplus of $1.2 trillion, having recorded a 36% increase in exports in September and accumulated a surplus of $938 billion in the first nine months of the year.

Higher US tariffs have disrupted some bilateral trade between Washington and Beijing, prompting Chinese exporters to seek alternative markets in Southeast Asia, Latin America and Europe.

High-tech products, including semiconductors, as well as automobiles, particularly hybrid and electric vehicles, have helped drive export growth this year.

China has also expanded domestic manufacturing capacity in sectors such as solar energy and electric vehicles as it seeks greater self-sufficiency and protection against Western export controls and trade uncertainty. However, production has grown rapidly while domestic consumption remains weak, prompting manufacturers to sell more goods overseas at competitive prices.

Ecaterina Bigos, a senior market strategist at BNP Paribas Asset Management, said China’s export-reliant, technology-driven growth model had delivered limited job creation and broad-based income gains, while the risk of job displacement linked to artificial intelligence continued to grow.

Trade tensions with the EU intensify

China’s growing trade surplus has fuelled concerns among trading partners that cheaper Chinese manufactured goods are threatening domestic industries and employment.

“It is untenable and unsustainable for the world’s second largest economy to rely on foreign demand to prop up its own growth,” said Eswar Prasad, a professor of economics and trade policy at Cornell University.

Through its persistent and large trade surpluses, China “has become a drag on world growth rather than an engine that pulls the rest of the world along”, he said.

The European Union is among the trading partners seeking to address the imbalance. The 27-member bloc runs a trade deficit with China of more than $1.1 billion a day.

Chinese exports to the EU rose 16% in the first nine months of the year. European countries are considering further restrictions on Chinese goods after the bloc reached an agreement with Beijing this month aimed at roughly halving Chinese hybrid vehicle imports over the next few years.

Gary Ng, a senior Asia-Pacific economist at French bank Natixis, said China was seeking to resolve trade disputes while preserving access to overseas markets. The agreement on hybrid vehicles could allow Chinese manufacturers to continue expanding sales in Europe while avoiding broader tariff increases.

However, Lynn Song, chief economist for Greater China at Dutch bank ING, said trade imbalances would remain difficult to resolve quickly, even with agreements between Beijing and Brussels.

Some policymakers have also argued that an undervalued yuan against the US dollar and the euro has contributed to China’s growing trade surplus, a claim dismissed by China’s central bank.

“We are likely to see continued resistance, rising protectionism, and persistent pressure from economies globally to protect their industries, and jobs, notably in high value sectors,” Bigos said.

Beijing has insisted that it does not seek a large trade surplus. On Friday, central bank governor Pan Gongsheng said countries running trade deficits and those recording surpluses should work together, adding that China remained committed to expanding domestic demand.