China Q3 growth set to pick up on stimulus, keeping 2026 goal within reach: Reuters poll

China's economic growth is projected to modestly improve in the third quarter, buoyed by new policy measures, though the surge may be insufficient to meet Beijing's lower growth target for the year, according to a Reuters poll of 50 economists. The forecasted GDP expansion for July-September is 4.4%, up from 4.3% in Q2 but below the July forecast of 4.6%.

This growth rate would still fall short of the official 4.5%-5% growth target. In late September, Beijing unveiled fresh support measures, such as interest-rate cuts and mortgage subsidies, following a pledge to bolster growth and meet the annual target. The allocation of 550 billion yuan ($82.17 billion) in unused government debt quotas aims to alleviate local government financial strains and bolster infrastructure spending.

While these actions could help policymakers reach the full-year growth target, concerns remain about local government financing constraints and weak investment incentives. The trade surplus widened in September as exports increased, putting China on track to surpass last year's record surplus of $1.2 trillion, potentially escalating trade tensions with major partners.

The government is set to release third-quarter GDP data, along with retail sales, industrial production, and investment figures, on October 19. GDP growth is expected to increase to 4.5% in the fourth quarter, while 2026's GDP growth is forecast to slow to 4.5% from 5.0% in 2025, and further decline to 4.4% in 2027. China's exports, a critical growth driver, face challenges due to cooling AI investment affecting technology demand and a potential EU deal limiting Chinese hybrid-vehicle shipments.

China is expected to lean more on fiscal stimulus to spur growth, with the central bank likely to keep interest rates and reserve requirements unchanged through Q1 2027. The central bank projects China's consumer inflation at 1.0% this year, below the 2% target, rising slightly to 1.1% in 2027. A forthcoming Politburo meeting and the annual Central Economic Work Conference in December may provide insights into Beijing's policy priorities for 2027.

Despite the challenges, Michelle Lam, greater China economist at Societe Generale, believes China is likely to achieve its 4.5-5.0% GDP growth target this year, though 2027 growth may fall further.