China's Economy Grows by 4.5% in Q3 Amid AI-Driven Exports Boost

China's gross domestic product (GDP) grew by 4.5% year-on-year in the third quarter of 2026, a slight increase from 4.3% in the previous quarter. This growth is largely attributed to a surge in exports, particularly in the technology sector driven by artificial intelligence (AI). As per the National Bureau of Statistics of China, these figures, published on Monday, surpassed many analysts' expectations.

During the first nine months of the year, the economy has expanded by 4.6%. This performance positions China well to meet its government-set GDP growth target of 4.5% to 5% for 2026, a growth rate that is among the slowest in decades, excluding the COVID-19 pandemic period.

Industrial production saw significant growth, recording a 5.5% rise in September compared to the previous year, an increase from 5.2% in August. This rise was primarily driven by employment in manufacturing, supported by the elevated demand for electronics and AI-related products.

Retail sales, however, were significantly less robust, registering only a 1.1% increase in September, compared to 0.4% in August. Fixed-asset investment continued to struggle, declining by 7.2% over the first nine months of 2026, with property investment falling sharply by 20.6%. Analysts indicate that the ongoing decline in domestic demand and a weakened property sector are notable concerns for the economy.

Duncan Wrigley, Chief China Economist at Pantheon Macroeconomics, highlighted the success of Beijing’s strategies to stabilise growth, commenting, "Headline industrial production rose in September partly as coalmines resumed operations after safety inspections prompted by a major accident." He noted that stronger export demand is significantly influencing manufacturing output and boosting the overall economy.

Despite these gains, China faces challenges related to continued reliance on export-driven growth, complicating the path toward more sustainable economic stability. Analysts from ABN Amro remarked that the increase in GDP correlated with a strong performance in exports, particularly in the context of the global technology boom. They stated that this trend has largely offset the negative impacts of ongoing weakness in domestic demand and geopolitical factors, such as the situation in Iran.

In summary, while the data indicates that China’s economy is gaining traction, it remains at the mercy of various external factors and domestic challenges, which could shape its growth trajectory in the near future.