China's economy expanded by 4.5% in the third quarter, slightly surpassing analysts' expectations. This growth was mainly supported by booming exports of technology and artificial intelligence (AI) products. Meanwhile, the domestic economy continued to face heavy pressure from a prolonged real estate crisis, contracting investment, sluggish consumption, and global energy price shocks resulting from the conflict in Iran.
China's National Bureau of Statistics (NBS) reported that the gross domestic product (GDP) for the third quarter (July-September) grew 4.5% year-on-year, improving from 4.3% growth in the previous quarter and slightly above the 4.4% forecast by economists surveyed by AFP news agency.
However, the 4.5% growth figure represents the lower bound of China's annual economic growth target range of 4.5% to 5.0%, which is the lowest target set by the government in several decades.
Mao Shengyong, Deputy Director of the National Bureau of Statistics, said at a press conference that the current international situation and environment are "complex and highly volatile," while domestic demand within China remains "insufficient."
The main driver of China's economy this quarter was strong export growth, particularly global demand for AI-related technology products such as computers, semiconductor chips, and equipment for data centers.
Rising exports have pushed China's trade surplus toward record highs, surpassing last year's $1.2 trillion mark. Industrial output grew 5.5% year-on-year from February to September, up from 5.2% the previous month, driven by strong foreign market demand. Retail sales rose 1.1% in September, marking the fastest growth since March.
Despite export growth, China's internal economic structure clearly shows signs of weakness. Real estate investment in the first nine months of the year fell more than 20% year-on-year, due to a longstanding debt crisis and oversupply in housing. Overall fixed-asset investment for the same period declined by 7.2%.
As the world's largest crude oil importer, China is impacted by rising energy costs caused by the war in Iran, which has disrupted shipping routes in the Persian Gulf. This factor led the International Monetary Fund (IMF) to downgrade its forecast for China's economic growth this year to 4.5%.
Economists say China needs to "rebalance" its economic structure by shifting reliance from exports and government investment toward driving growth through domestic consumption. However, this shift has not materialized substantially yet, as Chinese consumers lack confidence due to youth unemployment, slow wage growth, and the real estate crisis.
To counter the slowdown, the Chinese government began injecting targeted stimulus measures at the end of September, such as mortgage interest subsidies for certain home purchases, business interest rate cuts, and support for infrastructure investment.
However, Zhu Weizhang, Chief Economist at Pinpoint Asset Management, commented that the slightly better-than-expected third-quarter GDP figures might cause the Chinese government to delay additional large-scale stimulus measures in the fourth quarter.
Additionally, the flood of cheap Chinese goods into global markets has heightened trade tensions with key partners such as the United States and the European Union, which accuse China's government subsidies of creating unfair competition. Recently, trade negotiators from the EU and China reached an agreement to limit exports of Chinese hybrid vehicles to Europe.