China's economy grew 4.5% in the July-September quarter from a year earlier, supported by strong exports, bringing the country closer to its annual growth target even as domestic demand remained weak and trading partners stepped up pressure to address trade imbalances.
The latest official growth figure, released on Monday, marked an acceleration from the 4.3% expansion recorded in the April-June quarter, which was the slowest in more than three years.
Chinese leaders have set an economic growth target of 4.5%-5% for the full year, down from 5% growth last year. Earlier this month, the International Monetary Fund lowered its forecast for China's economic growth in 2026 to 4.5%, matching the lower end of Beijing's target.
Strong exports support growth amid domestic weakness
The headline growth figure is becoming "an increasingly poor indicator of how the broader economy is performing," said Max Zenglein, Asia Pacific senior economist at The Conference Board.
He said the figure masks "widening disparities across industries, regions, and households". Beijing faces difficult policy choices, and addressing domestic economic imbalances could prove more challenging than managing external pressures, he added.
China's domestic demand has weakened amid a prolonged downturn in the property market, which has eroded household wealth and encouraged people to save more.
However, strong exports remain one of the economy's few bright spots. China is on course to exceed last year's record global trade surplus of $1.2 trillion after exports rose 36% in September. The country had already recorded a trade surplus of $938 billion in the January-September period.
High US tariffs have affected some bilateral trade between Washington and Beijing, prompting China to seek alternative markets in Southeast Asia, Latin America and Europe. High-tech products, including semiconductors, as well as automobiles, particularly hybrid and electric vehicles, have been among the key drivers of export growth this year.
As China seeks greater self-sufficiency to protect itself from Western export controls and trade uncertainty, it has expanded domestic manufacturing capacity across industries such as solar energy and electric vehicles, with substantial government subsidies supporting production.
However, production capacity has grown rapidly amid weak domestic consumption, prompting manufacturers to sell more goods overseas at competitive prices.
An export-dependent, technology-driven growth model has generated limited job creation and broad income gains, while the risk of artificial intelligence-driven job displacement continues to increase, said Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management.
EU steps up pressure over trade imbalance with China
Many of China's trading partners are increasingly concerned that a surge in lower-cost Chinese manufactured goods threatens their domestic industries and economies.
"It is untenable and unsustainable for the world's second largest economy to rely on foreign demand to prop up its own growth," said Eswar Prasad, a professor of economics and trade policy at Cornell University.
Through its persistent and substantial trade surpluses, China "has become a drag on world growth rather than an engine that pulls the rest of the world along," he said.
The European Union is among the trading partners seeking to reduce its trade imbalance with China. The 27-member bloc runs a trade deficit with China of more than $1.1 billion a day.
Chinese exports to the EU increased 16% in the first nine months of the year. EU countries are considering further restrictions on Chinese products after the bloc reached an agreement with Beijing this month aimed at roughly halving the number of Chinese hybrid vehicle imports over the next few years.
China wants to maintain access to foreign markets and can work with other countries to resolve trade disputes, said Gary Ng, a senior economist for Asia Pacific at French bank Natixis.
He said the agreement with the EU on hybrid cars could allow China to continue increasing sales of Chinese-made products in European markets over the longer term while avoiding a broad increase in tariffs.
However, trade imbalances are unlikely to be resolved quickly, said Lynn Song, chief economist for Greater China at Dutch bank ING.
Policymakers have also argued that an undervalued yuan against the US dollar and the euro has contributed to China's growing trade surplus, although the country's central bank has rejected the claims.
"We are likely to see continued resistance, rising protectionism, and persistent pressure from economies globally to protect their industries, and jobs, notably in high value sectors," Bigos said.
Beijing has maintained that China does not seek a large trade surplus.
On Friday, Chinese central bank Governor Pan Gongsheng said countries running trade deficits and those recording surpluses should work together. He also said China, as a responsible country, remained committed to expanding domestic demand.