China announced on Monday that its economy expanded by 4.5% during the July-September quarter compared to the same period last year. This growth rate represents an acceleration from the 4.3% year-on-year expansion recorded in the April-June quarter, which had marked the slowest pace of growth for the country in over three years. As the year nears its end, this latest data brings the nation closer to meeting its official annual growth target of 4.5% to 5%, a goal set lower than last year’s 5% expansion. Earlier this month, the International Monetary Fund adjusted its 2026 forecast for China’s economic growth to 4.5%, aligning with the lower end of Beijing’s official objective.
Despite the headline growth figure, some analysts suggest it is becoming an increasingly unreliable indicator of the broader economy's health. Max Zenglein, Asia Pacific senior economist at The Conference Board, stated that the data masks widening disparities across various industries, regions, and households. According to Zenglein, Beijing is facing difficult trade-offs, and managing domestic imbalances may prove more challenging than addressing external pressures. The country's domestic demand remains weak, heavily burdened by a yearslong downturn in the property market that has squeezed household wealth and driven up savings rates.
Strong exports have emerged as a vital bright spot for the Chinese economy. The nation is currently on track to surpass its record $1.2 trillion global trade surplus from last year, having already logged a $938 billion surplus between January and September. Exports grew by 36% last month alone. This growth is largely driven by high-tech sectors, including semiconductors and automobiles, such as electric and hybrid vehicles. As China pursues self-sufficiency to shield itself from Western export controls and trade uncertainties, it has built massive domestic manufacturing capacities in industries like solar and EVs. Because this output was scaled up rapidly during a period of weakened domestic consumption, many of these goods are being shipped to overseas markets at competitive prices.
This export-reliant, tech-driven growth model has drawn significant criticism. Ecaterina Bigos, a senior market strategist at BNP Paribas Asset Management, noted that the model has shown limited job creation and broad income gains, while the risks of artificial intelligence-driven labor displacement continue to rise. Eswar Prasad, a professor of economics and trade policy at Cornell University, argued that it is unsustainable for the world’s second-largest economy to rely on foreign demand to prop up its own growth. Prasad further stated that 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.
International trading partners are increasingly concerned that their own domestic industries face growing threats from the surge of lower-cost Chinese manufactured imports. The European Union, which runs a trade deficit with China of more than $1.1 billion a day, is particularly impatient to reduce this imbalance. During the first nine months of the year, Chinese exports to the EU rose by 16%. While the EU recently reached an agreement with China to roughly halve the number of Chinese hybrid vehicle imports over the next few years, experts like Lynn Song, chief economist for Greater China at ING, warn that trade imbalances will be difficult to resolve quickly. Some policymakers have also argued that an undervalued yuan has contributed to the growing trade surplus, though China’s central bank has dismissed these claims.
Looking ahead, Bigos noted that the world is likely to see continued resistance, rising protectionism, and persistent pressure from global economies to protect their industries and jobs, particularly in high-value sectors. Beijing has insisted that it does not seek a large trade surplus. On Friday, China’s central bank governor, Pan Gongsheng, stated that countries with trade deficits and those with trade surpluses should work together, emphasizing that China is committed to expanding domestic demand as a responsible global actor.
