China's economy accelerates on robust exports as domestic weakness persists

HONG KONG (AP) — China on Monday said its economy grew 4.5% for the July-September quarter from a year ago fueled by robust exports, moving closer to meeting its official annual growth target as the year nears its end at a time when its trading partners felt an increased urgency in balancing their trade deficits with the country.

The better-than-expected official data accelerated from the 4.3% year-on-year growth recorded in the April-June quarter, which was the slowest expansion in more than three years.

For the whole year, Chinese leaders have set a growth target of 4.5%-5% , down from last year’s 5% expansion. Earlier this month, the International Monetary Fund trimmed its forecast for China’s 2026 economic growth to 4.5%, just meeting the lower end of Beijing’s goal.

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

That’s because it masks “widening disparities across industries, regions, and households,” Zenglein said. Beijing faces difficult trade-offs and managing domestic imbalances may prove more challenging than dealing with external pressures, he said.

China’s domestic demand has weakened, weighed on by a yearslong downturn in its property market that has squeezed household wealth and driven up savings.

Still, with strong exports being one of the few bright spots, China is on track to surpass last year’s record $1.2 trillion trade surplus globally, after logging a 36% growth in exports last month and already a $938 billion surplus between January and September.

Elevated U.S. tariffs have hit some U.S.-China bilateral trade and forced China to look elsewhere, including Southeast Asia, Latin America and Europe. High-tech exports such as semiconductors , and autos , including hybrid and electric vehicles, are among areas driving its export growth this year.

As China pursues self-sufficiency to help shield itself from Western export controls and trade uncertainties, it has built up massive domestic manufacturing capacities across industries such as solar and EVs which are also heavily subsidized by the government. But output was scaled up rapidly at a time of weakened domestic consumption, so many of these goods are shipped to overseas markets at a competitive pricing.

For many of its trade partners, they fear their domestic industries and economies are facing growing threats from the surge of lower-cost Chinese manufactured imports.

“It is untenable and unsustainable for the world’s second largest economy to rely on foreign demand to prop up its own growth,” said Eswar Prasad, a professor of economics and trade policy at Cornell University.

Through its persistent and large trade surpluses, China “has become a drag on world growth rather than an engine that pulls the rest of the world along,” Prasad said.

The European Union is among those impatient to reduce its trade imbalance with China. The 27-nation bloc runs a trade deficit with China of more than $1.1 billion a day.

EU countries are eyeing more curbs on China after the EU reached an agreement with China this month to roughly halve the number of Chinese hybrid vehicle imports over the next few years.