China's economy beats forecasts at 4.5% growth — but exports are doing the heavy lifting

China's economy grew 4.5% in the third quarter of 2026 compared with a year earlier, beating analyst forecasts of around 4.4% and accelerating from the 4.3% recorded in the April-June quarter — the slowest expansion in more than three years. The data, released Monday by China's National Bureau of Statistics, puts Beijing on track to meet its official 2026 annual growth target of 4.5% to 5% without resorting to additional stimulus, according to analysts. But the headline figure conceals a widening split between a factory sector firing on all cylinders and consumers who are cutting back, sleeping in their cars and bringing their own wine to restaurants.

Exports are doing the work. Through September, shipments were up more than 36% compared with the same month a year earlier, and China's global trade surplus — which stood at $938 billion through the first nine months of the year — is on pace to exceed last year's record $1.2 trillion, NBC News reported. Industrial output rose 5.5% in September. High-tech exports — semiconductors, electric vehicles, hybrid cars, prefabricated homes, even chicken meat and beauty products — have all surged. Some manufacturers that had moved production abroad are returning, as US tariffs on Chinese goods have converged closer to those on rivals such as Vietnam.

High-tech manufacturing, chip output, new energy vehicles, and export delivery values reflect a competitive industrial upgrading that is real and accelerating. However, the growth composition remains deeply unbalanced... Growth is export- and state-led. Domestic demand is not yet self-sustaining, and the property sector shows no floor.— Andy Ji, analyst, ITC Markets

On the other side of the ledger, retail sales grew just 1.1% in September — the fastest pace in six months, but off a low base. Fixed-asset investment fell 7.2% in the January-to-September period, weighed down by the strained finances of local governments. The property market remains in a prolonged downturn that has significantly eroded household wealth over five years. Average spending per trip during October's week-long national holiday fell to four-year lows.

The human texture of that weakness is visible in individual stories. Zhang Chao, who manages Southeast Asia operations for a motorbike headlights company, said his firm has all but abandoned the domestic market — where orders have doubled in export markets this year — because margins at home have collapsed. Laura Shi, who lost her sales job in June, road-tripped through the October holidays but slept in her car most nights to save on hotels. A Ningbo restaurant owner surnamed Dai told of customers arriving with their own wine instead of buying from his menu, and said he is considering cutting staff and taking on more of the work himself. In Hangzhou, accountant Carol Huang, 26, said her employer cut her bonus by nearly half; she noted that similar positions in the city pay between 3,000 and 6,000 yuan ($449–$897) a month — below her current wage — which is why she has not left, even though she is unhappy.

What on earth happened to the job market?— Carol Huang, accountant, Hangzhou

Official unemployment edged down to 5.2% in September, but economists caution the figure is flattered by China's definition of employment: anyone working even one hour a week is counted as employed, a threshold that encompasses the country's rapidly expanding gig economy.

Statistics bureau official Mao Shengyong called the 4.6% growth recorded across the first nine months of the year "hard won," and openly acknowledged "unbalanced and inadequate development." High-end manufacturing, the digital economy and modern services together contributed more than 40% of that growth, according to the bureau.

The headline official growth figure is becoming an increasingly poor indicator of how the broader economy is performing.— Max Zenglein, Asia-Pacific senior economist, Conference Board

Beijing has rolled out a package of support measures since late September — cheaper credit for infrastructure and technology, modest mortgage subsidies, and additional funds for local governments. Economists say these are enough to dispel fears of missing the annual target, but they remain tilted toward the supply side rather than household incomes or consumption.

Without a decisive policy shift toward supporting household incomes and consumption, China is likely to remain trapped in a prolonged period of low inflation and sub-par growth.— Michelle Lam, economist, Societe Generale

The export surge is also straining China's relationships with its biggest trading partners. According to NBC News, the European Union runs a trade deficit with China exceeding $1.1 billion a day; this month Brussels and Beijing reached a deal that would cut Chinese hybrid vehicle imports to the EU by roughly half over the coming years. But Brussels is planning further curbs after data showed September's trade surpluses with Germany and France each jumped more than 200% year-on-year. In the first nine months of the year, Chinese exports to the EU climbed 16%.

It is untenable and unsustainable for the world's second-largest economy to rely on foreign demand to prop up its own growth.— Eswar Prasad, professor of economics and trade policy, Cornell University

ANZ analysts warned that "rising trade tensions, protectionist measures and geopolitical frictions pose significant risks to future growth," and that "the economy is exposed to changes in the external environment to a greater extent than policymakers would prefer." The yuan firmed to its strongest level since July 2022 on Monday. Earlier this month, the International Monetary Fund lowered its projection for China's growth in 2026 to 4.5%, which would just clear the bottom of Beijing's target range.

Speaking on Friday, China's central bank governor Pan Gongsheng called for cooperation between deficit and surplus countries on trade, and said China, as a responsible nation, has remained dedicated to boosting domestic demand. Beijing has also insisted it does not seek a large trade surplus. Whether those commitments translate into the kind of structural shift economists say is needed — away from export- and state-led growth toward self-sustaining domestic consumption — is the question that will define China's economic trajectory well beyond 2026.

Why it matters — China's growth trajectory shapes global trade flows, supply chains and the economic policies of every major economy — and the gap between its factory strength and household weakness will determine whether the world's second-largest economy becomes a drag or a driver of global growth.

Reported by nytimes.com, businesstimes.com.sg, euronews.com, ft.com, reuters.com, nbcnews.com, finance.yahoo.com