HONG KONG (AP) — China said Monday its economy grew 4.5% in the July-September quarter from a year earlier, fueled by robust exports, moving closer to its official annual growth target for the year as its trading partners seek to balance their trade deficits with the country.
Economic growth accelerated from the 4.3% year-on-year rate recorded in the April-June quarter, the slowest expansion in more than three years. Its economy grew by 4.6% during the first three quarters.
For the entire year, Chinese leaders have set a growth target of 4.5% to 5%down from last year’s 5% expansion. Earlier this month, the International Monetary Fund pared its forecast for Chinese economic growth of 4.5% in 2026, the lower limit of Beijing’s objective.
“Domestic demand was weak, while trade was growing strongly,” said Dave Chia, an economist at Moody’s Analytics. Exports will likely remain strong, but global trade barriers remain a risk, he said.
Exports are strong, but domestic gloom persists
China domestic demand has been weighed down for a year slow-down in its real estate market.
The official growth figure is becoming “an increasingly poor indicator of the performance of the economy as a whole,” said Max Zenglein, senior economist for the Asia-Pacific region at the Conference Board.
In effect, this masks “growing disparities between sectors, regions and households,” Zenglein said. Beijing faces difficult compromises and management internal imbalances that could prove more difficult than dealing with external pressures, he added.
On Monday, Mao Shengyong, deputy director of China’s National Bureau of Statistics, warned of economic challenges ahead. “The international environment is complex and volatile, the problem of insufficient domestic demand remains relatively significant and the foundations for a stable and improving economy still need to be consolidated,” he told a news conference.
With exports one of the few bright spots, China is on track to surpass last year’s level. record $1.2 trillion global trade surplus, after logging growth of 36% in exports last month and already a surplus of 938 billion dollars between January and September.
High US tariffs have hit some bilateral trade between the United States and China and forced China to look elsewhere, notably in Southeast Asia, Latin America and Europe. High-tech exports such as semiconductors And automobilesincluding hybrid and electric vehicles, are among the areas driving its export growth this year.
As China seeks to become self-sufficient to protect itself from Western export controls and trade uncertainties, it has developed enormous domestic manufacturing capabilities across all sectors. like solar and electric vehicles, which are heavily subsidized by the government. But production has grown rapidly at a time of weak domestic consumption, so many of these products are shipped to foreign markets at competitive prices.
An export-dependent, technology-heavy growth model has shown limited job creation and significant income gains, while risks of driven by artificial intelligence labor displacement continues to grow, said Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management.
China faces growing pressure from the EU to rebalance its trade
Many business partners fear their industries and national economies face growing threats from imports of lower-cost Chinese manufactured goods.
“It is untenable and unsustainable for the world’s second-largest economy to rely on foreign demand to support its own growth,” said Eswar Prasad, professor of economics and trade policy at Cornell University.
Thanks to its persistent and large trade surpluses, China “has become a drag on global growth rather than an engine that drives the rest of the world,” Prasad said.
The European Union is among those eager to reduce its trade imbalance with China. The bloc of 27 countries records a trade deficit with China of more than $1.1 billion A day.
Over the first nine months of the year, Chinese exports to the EU increased by 16%. EU countries are look more restrictions on China after the arrival of the EU an agreement with China this month to roughly halve the number of Chinese imports of hybrid vehicles over the next few years.
China can work with other countries on disputes and wants to maintain market access, said Gary Ng, senior Asia-Pacific economist at French bank Natixis. Thanks to a deal with the EU on hybrid cars, for example, China will likely still be able to sell more Chinese-made products in the long term, while avoiding a sharp rise in tariffs.
Even with deals reached between China and the EU, “trade imbalances will be difficult to resolve quickly,” said Lynn Song, chief economist for Greater China at Dutch bank ING.
Policymakers say the undervaluation of the yuan, China’s currency, against the dollar and the euro has contributed to China’s growing trade surplus, although China’s central bank has rejected the claims.
“We will likely see continued resistance, a rise in protectionism and persistent pressure from economies around the world to protect their industries and jobs, particularly in high value-added sectors,” Bigos noted.
China insists that it don’t look a large trade surplus. Central bank governor Pan Gongsheng said on Friday that countries with trade deficits and those with trade surpluses should work together and China, as a responsible country, is committed to increasing domestic demand.
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