China's Growth Picks Up to 4.5% in Q3, Beating Forecasts as Exports Mask Weak Home Demand

China's economy picked up speed in the third quarter, growing faster than economists had expected. Monday's figures, however, also showed how much of that growth still depends on factories and exports rather than on Chinese households.

Gross domestic product grew 4.5% year-on-year in July-September, the National Bureau of Statistics said on Monday. That was ahead of the 4.4% forecast in a Reuters poll of economists and up from 4.3% in the April-June quarter, which had been the weakest reading in more than three years. Compared with the previous quarter, the economy grew 1.2%, faster than the 0.9% pace in the second quarter.

For the first nine months of 2026, growth averaged 4.6%. That keeps China within its official full-year target range of 4.5% to 5%, although economists say a solid fourth quarter is still needed to get there. Total output for January to September was about 107.11 trillion yuan, or roughly $15.9 trillion.

Where the strength came from

Industry carried most of the load again. Industrial output rose 5.5% in September from a year earlier, in line with forecasts and slightly faster than August's 5.2%. High-tech manufacturing, chip production and electric vehicles all did well, and export deliveries stayed strong, helped by global demand for AI-related hardware.

The bigger surprise was spending. Retail sales rose 1.1% in September, nearly double the 0.6% that economists expected and well above August's 0.4%. That is still a very weak pace for an economy of China's size, but it is a modest improvement on recent months.

Where it is still weak

Investment continued to fall. Fixed-asset investment dropped 7.2% in the first nine months from a year earlier, the same pace of decline as in the January-August period. Property investment was the biggest drag, falling 20.6% and shrinking faster than the 19.9% drop recorded through August. There is still no clear sign that the housing slump has hit bottom.

Analysts call this a two-speed economy: state-backed factories and exporters are doing well, while households stay cautious and private companies hold back on new spending. One currency strategist in Shanghai described the growth as led by exports and the state, with domestic demand not yet able to stand on its own.

Why it matters beyond China

The stronger-than-expected numbers make it less likely that Beijing will roll out large new stimulus soon. China's central bank has kept its key policy rate unchanged since a cut in May 2025, and rising producer and consumer prices limit how much further it can ease. Any extra support is now more likely to come through government spending.

The export engine also faces new risks. Global investors are increasingly worried about how the AI build-out will be paid for, and tech stocks across Asia fell on Monday. A slowdown in AI spending would hit demand for the chips, servers and components that have powered China's exports this year. A recent agreement with the European Union to limit Chinese hybrid car shipments could also slow one of China's fastest-growing export categories.

For trading partners such as India, an economy that keeps growing through exports while demand at home stays weak usually means more competition from cheap Chinese goods in third markets. It also means China will import less than its size would suggest. Economists polled by Reuters expect growth of about 4.5% for 2026 as a whole, easing to 4.4% next year.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.