China’s economic growth accelerates in Q3, strong exports being main driver

Economic data from China released on Monday showed China’s economic growth picked up in the third quarter and rose from three-year low, posted in Q2.

China’s GDP came at 4.5% in Q3, up from 4.3% in Q2 and beating 4.4% forecast, signaling that the economy is on track to reach its 2026 target at 4.5%-5.0%, after a slowdown in the second quarter.

However, solid economic growth has been primarily driven by soaring exports, which grew 36.3% in September compared to 25% in August and strongly beat forecast at 25.5%, with trade surplus rising to $133B in September from $119B previous month, data released last week showed.

The same report showed that inflation remained soft in September and consumer sentiment weakened further, pointing to problem of weak domestic demand which prompts many businesses to shift their focus to exports.

Monday’s data showed industrial production continuing to strengthen (September 5.5% vs August 5.2% and forecast 5.4%) while retail sales increased by 1.1%, more than doubling August’s 0.4% growth and strongly beating 0.5% consensus.

Overall, the latest economic data signal that Chinese economy stands on firm ground and heads towards pre-pandemic levels, although with the largest contribution coming from strong exports, while weak domestic demand and  the property market being still in a downturn, expected to create more headwinds to the economic growth.