China's economy grows 4.5 percent in third quarter, beating forecasts on AI-driven export boom

China's economy has grown faster than expected in the most recent quarter amid booming exports underpinned by artificial intelligence, according to official figures. China's gross domestic product (GDP) expanded 4.5 percent in the July-September period from the same quarter a year earlier.

That growth picked up from 4.3 percent in the second quarter and beat most analysts' forecasts, figures released on Monday by the National Bureau of Statistics showed.

During the first nine months of the year, GDP grew 4.6 percent year-on-year, according to the preliminary figures.

China's technology-related exports have surged during the AI boom. Chinese exports surged more than 16 percent in the first three quarters of the year to reach 23.19 trillion yuan ($3.47bn), according to the official data, largely due to strong demand for semiconductors and other tech-related goods.

But growth in the world's second-largest economy has been dampened by weak domestic demand and a sagging property market. Even as exports rise, consumer spending at home is not gaining the expected pace.

Retail sales, a key measure of domestic consumption, increased just 1.1 percent year-on-year in September and 2.6 percent during the first nine months of 2026.

Industrial production, which measures output in sectors such as manufacturing and mining, rose 5.5 percent in September, taking growth in the first three quarters to 5.3 percent. In other words, the factory wheels are turning, but consumer spending has not seen the same surge.

Investment in fixed assets, which covers spending on real estate, factories and machinery, edged up 0.7 percent last month but contracted 7.2 percent during the January-September period. The strains in the property sector emerged as a major reason for that contraction.

China's ruling Communist Party has set a GDP growth target of 4.5 to 5 percent for 2026, which would be among the slowest expansions in decades, excluding during the COVID-19 pandemic.

Zhiguo He, a finance professor at Stanford University's Graduate School of Business who studies the Chinese economy, said that while China's economy is on track to hit official targets, Beijing will be wary of the continuing reliance on export-driven growth.

He said: 'I expect Beijing is getting 4.5 percent as wanted. A managed slow slowdown is the best Beijing can hope for.' He added: 'Real estate is still shrinking. This is what Beijing wanted and a good thing, and China's households have been adapting their expectations based on this.'

Overall, the third-quarter picture is mixed — strength in exports and industrial production, but weakness in consumption and investment. To stay within target for the rest of the year, Beijing's biggest challenge will be reviving domestic demand.