China’s GDP grew 4.5% in the July-September quarter, up from 4.3% in the previous quarter, bringing the country closer to its 2026 growth target of 4.5%-5%.
Industrial output rose 5.5% in September, but retail sales grew by just 1.1%, while property investment and fixed-asset investment declined.
The IMF has called for stronger fiscal support and measures to boost domestic demand as China faces the challenge of sustaining growth without relying so heavily on exports.
China’s economy grew 4.5% year-on-year in the July-September quarter, recovering from a more than three-year low in the previous quarter as strong exports helped the world’s second-largest economy move closer to its annual growth target. Data released by China’s National Bureau of Statistics on Monday, October 19, showed that gross domestic product (GDP) growth accelerated from 4.3% in the April-June quarter, exceeding economists’ expectations of 4.4%. The latest figures offer some relief to policymakers, although persistent weakness in domestic demand and the prolonged property-sector downturn continue to weigh on the economy.
Beijing has set a full-year growth target of 4.5%-5% for 2026, compared with the 5% expansion recorded in 2025. The International Monetary Fund has forecast growth of 4.5% this year, placing its projection at the lower end of the government’s target range. China’s economy expanded 4.6% in the first nine months of the year, according to the latest data, keeping the annual target within reach as the country enters the final quarter.
Strong Exports Support Growth As Domestic Demand Remains Weak
Exports have emerged as a major source of support for China’s economy, with overseas demand for manufactured goods and high-tech products helping offset sluggish activity at home. Industrial output rose 5.5% year-on-year in September, accelerating from 5.2% in August. China’s export strength has also widened its trade surplus, increasing concerns among major trading partners that the country is relying heavily on overseas markets to sustain growth.
However, domestic demand remains a significant weakness. Retail sales rose 1.1% in September from a year earlier, improving from 0.4% growth in August, but household spending remains subdued. The property market continues to struggle, with property investment falling 20.6% in the first nine months of 2026. Fixed-asset investment also declined 7.2% over the same period, highlighting continued caution among businesses and investors. The uneven performance has left China increasingly dependent on manufacturing and exports while consumption and private investment lag.
China Faces Pressure To Rebalance Its Economy
The growth figures could ease immediate pressure on Beijing to introduce large-scale stimulus, but economists have warned that export-led expansion may be difficult to sustain. Trade tensions with the European Union are mounting, while efforts to curb imports of Chinese vehicles could weigh on one of the country’s key export industries. A slowdown in global demand for technology products could also challenge China’s manufacturing-led growth strategy.
The IMF has called for stronger fiscal support, arguing that China needs to boost domestic demand and address persistent weakness in the property sector. While the latest figures suggest that Beijing remains on course to meet its annual growth target, the imbalance between robust exports and subdued household spending remains a challenge. The longer-term task for policymakers will be to make growth less dependent on external demand and establish a more sustainable recovery at home.
