Key Takeaways
- China’s economy grew 4.5% in the third quarter, supported by strong exports.
- The country recorded a $938 billion trade surplus during January to September.
- Weak domestic demand continues to challenge China’s growth and manufacturing balance.
China’s economy grew 4.5% year on year in the July to September quarter of 2026, accelerating from 4.3% in the previous quarter as strong exports supported growth. The latest figure brings China closer to its annual growth target of 4.5% to 5%, even as weak domestic demand and rising trade tensions affect its economic outlook.
Strong Exports Support China’s Economic Growth
The third-quarter expansion exceeded expectations and improved on the 4.3% growth recorded between April and June, which was China’s slowest quarterly growth in more than 3 years. For 2026, Chinese leaders have set a growth target of 4.5% to 5%, compared with 5% growth in 2025.
The International Monetary Fund recently lowered its forecast for China’s 2026 economic growth to 4.5%, matching the lower end of the government’s target.
Exports remain a major source of growth. China recorded a trade surplus of $938 billion during the first 9 months of 2026 and is on course to exceed its record annual surplus of $1.2 trillion in 2025. Exports rose 36% in September compared with a year earlier.
Chinese exporters have expanded sales in Southeast Asia, Latin America, and Europe as elevated US tariffs affect some trade between China and the United States. High technology products, including semiconductors, automobiles, hybrid vehicles, and electric vehicles, have supported export growth.
China has also expanded domestic manufacturing capacity in sectors such as solar energy and electric vehicles. However, production has grown while domestic consumption remains weak, encouraging manufacturers to sell more goods overseas at competitive prices.
Weak Domestic Demand And Global Trade Imbalances
China’s domestic demand continues to face pressure from a prolonged property market downturn. Falling property values have reduced household wealth and encouraged consumers to save more, limiting spending across parts of the economy.
The gap between strong exports and weaker domestic demand has also increased concerns among trading partners. Many economies are worried that lower-priced Chinese-manufactured goods could put pressure on their own industries and employment.
The European Union is among the regions seeking to reduce its trade imbalance with China. The bloc records a trade deficit with China of more than $1.1 billion per day. Chinese exports to the EU rose 16% during the first 9 months of 2026.
The EU and China also reached an agreement this month to roughly halve the number of Chinese hybrid vehicle imports over the next few years. The arrangement could affect trade flows in the automotive sector while allowing continued access to the European market.
Economists have warned that China’s export-driven growth model may not generate enough jobs or broad income gains to balance the domestic economy. Growing use of artificial intelligence also creates uncertainty around future employment in some industries.
China’s central bank governor Pan Gongsheng said countries with trade deficits and trade surpluses should work together. He also stated that China remains committed to expanding domestic demand.
For global businesses, China’s latest growth figures show the importance of export markets to its economy. However, weaker domestic consumption and trade imbalances remain key factors for companies assessing demand, manufacturing capacity, and international supply chains.
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