Beijing, Oct 19 China’s economy grew 4.5 per cent in the third quarter of 2026, fuelled by global demand for artificial intelligence (AI) infrastructure, which helped it offset weak domestic consumption and a deepening property market crisis.
It is a recovery of sorts for the world’s second-largest economy as the growth fell to 4.3 per cent in the second quarter, its lowest since 2022, weighed down by stagnant domestic demand and higher energy costs linked to the Iran war, offsetting the robust export growth.
China’s economy expanded 4.6 per cent year-on-year in the first three quarters, generating about 107.11 trillion yuan (about USD 15.94 trillion) in output during the January-September period, according to data released by the National Bureau of Statistics (NBS) on Monday.
However, the recovery remains uneven, with manufacturing and exports driving growth while household spending and investment continue to struggle, raising questions about the sustainability of the expansion.
“The steady economic performance from the first three quarters has laid a good foundation for the achievement of the annual target,” Mao Shengyong, deputy director of the NBS, said at a press conference in Beijing.
Mao noted that several economic indicators improved in September compared with the preceding two months, although he cautioned that the international environment remained volatile and domestic demand insufficient.
But again, quarter after quarter it is exports which are sustaining China’s economic growth, fuelling global concerns that the country with low-priced goods is growing at the expense of domestic industries of the countries that are importing its products.
China’s export performance has emerged as a major source of economic resilience as exports surged 36.3 per cent year-on-year in September. Its trade surplus in nine months mounted to USD 938 billion.
At home, however, China continued to grapple with sluggish consumption in the 3rd quarter, with retail sales, a key indicator of household consumption, increasing just 1.1 per cent year-on-year in September, improving from 0.4 per cent in August.
Last week, the International Monetary Fund in its world economic outlook report trimmed its projection of China’s economic growth for 2026 by 0.1 percentage point to 4.5 per cent, cautioning that resilient exports are no longer sufficient to fully offset the sluggish domestic demand.
The revised projection is down from the previous forecast of 4.6 per cent.
“Sluggishness in domestic consumption and weakening investment amid continued property sector strains were only partly offset by robust export performance,” the IMF said.
“Higher global oil prices, together with protracted uncertainty and structural headwinds, are expected to weigh on activity,” it said, adding that policy support by Beijing was expected to prevent a “sharper slowdown”.
Sheana Yue, an economist at Oxford Economics, said manufacturing and high-tech exports had supported growth despite weakness in domestic spending and investment.
She told the BBC that the property market continued to face significant challenges, with little evidence of an imminent end to the downturn.
Investment remained another major weakness. Fixed-asset investment, covering infrastructure, manufacturing and property construction, declined 7.2 per cent year on year in the first nine months of 2026.
Property investment fell 20.6 per cent during the January-September period, compared with a 19.9 per cent contraction in the first eight months, underlining the continuing drag from the crisis-hit real estate sector, according to NBS data.
The government has introduced a series of incremental measures to support growth, including accelerating bond issuance, advancing major infrastructure projects, reducing borrowing costs for some businesses and providing mortgage interest subsidies to homebuyers.
Their impact, however, remains uncertain. Economists have also warned that relying heavily on exports to sustain growth could expose China to increasing trade barriers and geopolitical risks.
Zhang Yuhan, principal economist at The Conference Board’s China Centre, said the economy remained driven largely by production and supply-side activity.
While this had supported near-term growth and industrial upgrading, a more balanced and sustainable recovery would require stronger household consumption, services demand and consumer confidence, he told the Hong Kong-based South China Morning Post.
The urban unemployment rate eased to 5.2 per cent in September from 5.3 per cent in August, the NBS said.
China’s latest growth figures thus reflect an economy increasingly supported by industrial production and overseas demand but still struggling to revive domestic consumption and investment.
Economists say while the AI boom and strong exports have helped China’s growth momentum amid mounting economic pressures, the persistence of the property crisis and weak household demand underscores the challenge of making the recovery more broad-based and sustainable.
(PTI News)
