Beijing's Growth Target Masks Household Strain

China’s economy grew 4.5% year on year in the July-September quarter, as weak domestic demand left households grappling with a yearslong property downturn. Exports powered the headline figure. Household wealth and spending remained under pressure.

The Number From Beijing

The National Bureau of Statistics reported 4.6% growth for the first three quarters. The third-quarter figure rose from 4.3% in April-June and beat the 4.41% consensus forecast from economists surveyed by Chinese financial data provider Wind. Beijing is aiming for growth between 4.5% and 5% this year, short of the “around 5 per cent” goal it set in previous years.

Max Zenglein, Asia Pacific senior economist at The Conference Board, called the official figure “an increasingly poor indicator of how the broader economy is performing” because it conceals “widening disparities across industries, regions, and households.” He said Beijing faced difficult trade-offs and might find it harder to manage domestic imbalances than external pressures.

The second-quarter growth rate marked the weakest quarterly result reported since the end of 2022. The International Monetary Fund lowered its forecast for China’s 2026 growth to 4.5%, the bottom of Beijing’s target range. The target may look tidy. The pressures beneath it aren’t.

Households Carry the Imbalance

The property-market downturn has weakened domestic demand, squeezed household wealth and pushed savings higher. Export growth, by contrast, has held strong. China is on course to top last year’s record $1.2 trillion global trade surplus after exports climbed 36% last month; it logged a $938 billion surplus between January and September.

High-tech exports, including semiconductors, and autos, including hybrid and electric vehicles, have driven growth this year. Elevated U.S. tariffs have hit some U.S.-China trade, leading China to seek other markets, including Southeast Asia, Latin America and Europe.

Beijing has built up domestic manufacturing capacity in industries such as solar power and electric vehicles, seeking self-sufficiency and protection from Western export controls and trade uncertainty. The government heavily subsidizes these industries. Production surged as domestic consumption weakened, sending many goods to overseas markets at competitive prices.

Ecaterina Bigos, senior market strategist at BNP Paribas Asset Management, said an export-reliant, highly tech-driven growth model had produced limited job creation and broad income gains, even as risks of artificial intelligence-driven labor displacement kept growing. Export figures may climb, but they don’t show who gets the jobs or shares in the income.

Surplus, Pressure, and the Official Answer

Trade partners fear that lower-cost Chinese manufactured goods threaten 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. He said persistent, large trade surpluses had turned China into “a drag on world growth rather than an engine that pulls the rest of the world along.”

The 27-nation European Union runs a trade deficit with China of more than $1.1 billion a day, while Chinese exports to the EU rose 16% in the first nine months of the year. After the EU and China reached an agreement this month to roughly halve Chinese hybrid vehicle imports over the next few years, EU countries are weighing further restrictions. Gary Ng, a senior economist for Asia Pacific at French bank Natixis, said the deal could allow China to maintain market access and keep selling more made-by-China products to EU economies over the longer term while avoiding a broad tariff increase.

“Trade imbalances will be difficult to resolve quickly,” said Lynn Song, chief economist for Greater China at Dutch bank ING. Policymakers have also said an undervalued yuan against the dollar and euro helped drive the growing surplus, a claim China’s central bank has rejected. Bigos said resistance and protectionism would likely persist as economies seek to protect industries and jobs, particularly in high-value sectors.

Beijing says China doesn’t seek a large trade surplus. On Friday, central bank governor Pan Gongsheng said countries with trade deficits and surpluses should work together, adding that China, as a responsible country, had committed to expanding domestic demand.