As global money gets costlier, India must protect investor trust

China's economy expanded by 4.5% in the July-September quarter, according to an official figure released on Monday. This growth rate, which topped expectations, brings the country closer to its annual growth target of 4.5%-5%, announced by Chinese leaders. The International Monetary Fund (IMF) recently adjusted its forecast for China's growth this year to 4.5%, aligning with Beijing's target range.

Exports played a significant role in driving this growth, with the country reporting a 36% surge in exports last month and a $938 billion surplus for the January-September period. This surplus has propelled China towards surpassing the previous record of $1.2 trillion in trade surplus. High-tech goods, such as semiconductors and hybrid and electric vehicles, are contributing to this export growth, thanks to China's extensive and heavily subsidised manufacturing capacity in these sectors.

However, the lack of strong domestic demand remains a challenge, as consumption has lagged behind output expansion.

Max Zenglein, senior market strategist at BNP Paribas Asset Management, notes that this export-driven growth model has not generated substantial job creation or income gains. Senior economist at The Conference Board, Zenglein also highlights the growing risk of job losses due to AI-driven automation. This raises concerns about the overall health of the Chinese economy, as the headline growth figure appears increasingly inadequate in capturing the broader economic situation.

Meanwhile, the European Union faces a trade deficit with China of over $1.1 billion daily. Some EU member states are pushing for stricter regulations on Chinese trade, even after a recent agreement to limit Chinese hybrid vehicle imports. China, however, maintains that it seeks a balanced trade relationship and is committed to expanding domestic demand.

The country's central bank governor, Pan Gongsheng, reaffirmed this stance, emphasizing the need for cooperation between deficit and surplus economies. Despite these efforts, analysts argue that resolving trade imbalances quickly remains a challenging task for China.