China’s economic growth picks up in Q3, beating expectations

In the third quarter, China's economic growth accelerated to 4.5% year-on-year, surpassing market expectations and bringing relief to policymakers who had been under pressure to stimulate the economy more aggressively to meet the annual target. The National Bureau of Statistics announced the GDP growth rate of 4.5%, surpassing the forecast of 4.4% in a Reuters poll. This improvement marked a significant shift from the three-year low of 4.3% in the April-to-June period.

China's economic strategy heavily relies on exports for growth, but this engine faces challenges as domestic demand remains weak and trade tensions with the European Union intensify. The government's shift in credit and resources from property to high-tech industries has resulted in a two-speed economy, with strong factory output and exports overshadowing weak consumption and private investment.

For the first nine months, the economy grew 4.6%, within the government's annual growth target of 4.5%-5.0%. On a quarterly basis, the economy expanded by 1.2%, exceeding the expected 1.1% growth and accelerating from the 0.9% growth in the previous quarter.

China's trade surplus widened more than anticipated in September as exports surged, keeping the country on track to exceed the record surplus of US$1.2 trillion from the previous year and potentially escalating trade tensions with major partners. A deal with the EU to restrict Chinese hybrid-vehicle shipments may impact the booming auto trade.

Beijing has recently increased support for home buyers and introduced measures to direct cheaper credit towards sectors such as infrastructure and technology, allocating 550 billion yuan (US$82.28 billion) in unused government debt quotas to alleviate local governments' financial strain and boost infrastructure investment.

However, infrastructure investment declined by 4.2% in the first nine months, shrinking at the same pace as the previous period. Retail sales grew by 1.1% in September, an improvement from the 0.4% increase in August and better than the expected 0.6% rise. This growth marked the fastest since March. Property investment fell by 20.6% in the first nine months in September.

Policymakers avoided releasing large-scale stimulus, as robust goods exports, driven by a global tech boom fueled by artificial intelligence, should enable the country to achieve its annual growth target. Industrial output expanded by 5.5% in September, matching expectations and representing the fastest growth in six months.