China's economy grew by 4.5% year-on-year in the third quarter, according to the National Bureau of Statistics of China, exceeding what economists had predicted and accelerating from the second quarter's 4.3% growth rate. The expansion was driven by a sharp rise in factory output, which grew much faster than consumer spending. Over the first nine months of the year, the economy has expanded by 4.6%, putting China on track to meet its government target of 4.5%-5% growth for 2026 without requiring additional stimulus measures.
Industrial production rose 5.5% in September, up from 5.2% in August, according to official data. Manufacturing output grew by 6.0% year-on-year in September, bolstered by stronger export demand for electronics, AI-related equipment and vehicles. High-tech manufacturing continued to outperform traditional sectors. Retail sales, by contrast, increased only 1.1% in September, up from 0.4% in August, revealing the uneven nature of the recovery.
Duncan Wrigley, chief China economist at Pantheon Macroeconomics, attributed some of the industrial production gains to coalmines resuming operations following safety inspections prompted by a major accident. He noted that Beijing's policymakers were likely satisfied with their efforts to stabilise growth in the third quarter. Wrigley observed that China was climbing the value-added ladder through stronger performance in high-tech sectors compared to traditional industries.
The export surge has been substantial. Data released last week showed that China's exports jumped by more than a third in September, with shipments of electronics related to artificial intelligence driving much of the increase. Analysts at ABN Amro said the pickup in GDP growth mainly reflected ongoing export strength tied to the global AI and technology boom, offsetting drags from the Iran conflict and continuing weakness in domestic demand.
However, other indicators pointed to underlying economic fragility. Fixed-asset investment fell 7.2% over the first nine months of the year, while property investment plummeted by 20.6%. Infrastructure spending remained weak, suggesting that domestic investment remained a drag on growth despite the strong export performance.