China grows 4.5% as exports surge, but domestic demand stays weak

China’s economy grew 4.5% in the July-September quarter from a year earlier, supported by strong exports. The official figure beat expectations and picked up from 4.3% in April-June, which was the slowest pace in more than three years.

The result moves China closer to its 2026 growth target of 4.5% to 5%, down from last year’s 5% expansion. Earlier this month, the International Monetary Fund cut its forecast for China’s growth this year to 4.5%, the bottom of Beijing’s range.

Exports do the heavy lifting

Exports remain one of the few bright spots. After a 36% jump in exports last month and a $938 billion surplus for January to September, China is on course to top last year’s record $1.2 trillion trade surplus.

Higher US tariffs have dented bilateral trade, pushing Chinese exporters toward Southeast Asia, Latin America and Europe. High-tech goods, including semiconductors and hybrid and electric vehicles, are leading the growth. China has built vast, heavily subsidised manufacturing capacity in sectors such as solar and EVs as it pursues self-sufficiency against Western export controls.

Domestic cracks remain

Output has expanded quickly while consumption lagged, so much of the production is sold abroad at competitive prices. Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management, said the tech-driven, export-reliant model has produced limited job creation and income gains, while the risk of AI-driven job losses is growing.

Max Zenglein, Asia Pacific senior economist at The Conference Board, said the headline official growth figure is becoming an increasingly poor indicator of how the broader economy is performing. He believes it hides widening disparities across industries, regions and households, and that managing domestic imbalances may prove harder for Beijing than handling outside pressures.

Domestic demand has softened, weighed down by a years-long property slump that has eroded household wealth and pushed up savings.

Cars, Europe and trade tensions

China shipped about 919,000 passenger vehicles overseas in September, driven by strong foreign demand for plug-in hybrids and all-electric models, according to data from the China Association of Automobile Manufacturers. For the first nine months of 2026, exports topped 7.1 million passenger cars, a jump of more than 70% from the same period a year earlier.

But fears that cheaper Chinese imports threaten partner industries and trade balances remain. The 27-nation European Union bloc runs a deficit with China of more than $1.1 billion, or €981.2 million, a day. Chinese exports to the EU rose 16% in the first nine months of the year.

Some member states want further curbs, even after an agreement this month to roughly halve Chinese hybrid vehicle imports over the next few years. That agreement saw the EU cap Chinese hybrid vehicle imports at 350,000 a year. Analysts say China can keep working with other countries on disputes while protecting its market access. The hybrid deal, for instance, may let it keep selling more in the longer run while avoiding a broad tariff hike. Still, Lynn Song, chief economist for Greater China at ING, said trade imbalances will be difficult to resolve quickly.

For Nigerian businesses, China’s export-heavy model matters because it keeps competitively priced goods flowing into global markets while domestic demand stays weak. That can ease import costs, but it also raises the risk of more trade curbs abroad and stronger competition for local manufacturers.