China’s Growth Accelerates to 4.5% in Third Quarter as Investment and Domestic Demand Remain Weak
Key Facts
China’s economy grew 4.5% year on year in the third quarter of 2026, accelerating from 4.3% in the second quarter, according to the National Bureau of Statistics’ preliminary estimate. On a seasonally adjusted quarterly basis, gross domestic product rose 1.2%. The bureau’s deputy head said growth in the first nine months, at 4.6%, was consistent with the full-year growth target, and that the pace in the third quarter was 0.2 percentage point higher than in the previous quarter. Output growth accelerated while domestic consumption and investment remained under pressure. This highlights a divergence between an improvement in the headline growth rate and continued weakness in components of domestic demand.
China’s leadership set a 2026 growth target of between 4.5% and 5%, compared with expansion of 5% last year, according to the Associated Press. Dave Chia, an economist at Moody’s Analytics, said, "Domestic demand was weak, while business activity grew strongly." Chinese exports grew 36% year on year in September, while the trade surplus for January–September reached $938 billion, the agency reported. These figures put external trade at the forefront of factors supporting activity during the period. But they coincide with signs that household spending and investment are not keeping pace with the strength of exports.
Industrial output rose 5.5% year on year in September, accelerating by 0.3 percentage point from August, while growth reached 5.3% in January–September, according to the National Bureau of Statistics. Retail sales, by contrast, rose 1.1% in September, the same rate recorded in the first nine months. Retail sales excluding automobiles rose 3.9% in September, pointing to better performance in this category than in total sales. Online retail sales of goods and services also rose 4.4% in January–September, while online sales of goods increased 3.8%. These indicators show growth in some consumption channels, while overall retail sales growth remains limited.
Investment was the clearest weak spot in the first nine months’ data: fixed-asset investment fell 7.2% year on year and private investment declined 10.4%, according to the National Bureau of Statistics. Investment in real estate development dropped 20.6%, extending pressure on the property sector. Infrastructure investment also fell 4.2% over the same period. In contrast, investment in high-tech industries rose 4.9%, providing a positive exception within the broader investment picture. The divergence between growth in high-tech industries and contractions in private and property investment reflects uneven sources of economic activity.
The official manufacturing purchasing managers’ index showed a limited improvement ahead of the GDP data, reaching 50.1 points in September, up 0.3 point from the previous month and entering expansion territory, according to the National Bureau of Statistics. By contrast, the bureau’s deputy head said, "The problem of insufficient domestic demand remains prominent," warning that the foundation for economic improvement needs to be strengthened. ANZ analysts said performance in the first nine months left domestic and global concerns about imbalances in the Chinese economy in place, despite the surprise in September’s data. The analysts said, "Fiscal support remains important" amid constraints limiting monetary easing. The CSI 300 had lost 3.4% in the week before the GDP data was released, its worst weekly performance since mid-July, Hong Kong Radio Television reported, citing Reuters.
A Reuters poll showed China’s growth is expected to slow to 4.5% in 2026, from 5% last year, and then to 4.4% in 2027. That places the third-quarter result within a trajectory of slower annual growth than the previous year, despite an improvement in the quarterly pace. The domestic demand gap cited by the statistics official and ANZ analysts remains central to concerns about the balance of growth sources. Export and trade-surplus data also underscore the importance of external activity in supporting the economy during the period. Investors are focused on whether consumption and investment can catch up with that support in coming quarters.