China's economy grows by 4.5 percent in the third quarter - but the real estate crisis continues to slow things down

Slight tailwind in the summer quarter

China's economy gained some momentum in the summer months, but it continues to face enormous challenges domestically. As the statistics office in Beijing announced, the gross domestic product (GDP) of the world's second-largest economy increased by 4.5 percent in the third quarter compared with the same period last year. This meant the development exceeded the average forecast of economists, who had expected 4.4 percent. In the second quarter, the increase had stood at 4.3 percent, after a strong start to the year with 5.0 percent.

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In direct comparison with the previous quarter, economic output grew by 1.2 percent. On an annual basis, the authorities reported total growth of 4.6 percent for the first nine months. This means the country is currently within the corridor specified by the government, which is aiming for growth of 4.5 to 5.0 percent for the full year. Statistics office spokesman Mao Shengyong emphasized confidence in achieving this annual target. He attributed the weak phase in the second quarter to fluctuating oil prices as a result of the Middle East situation and held out the prospect of a further brightening in the fourth quarter.

Retail surprises positively - for the time being no further economic stimulus packages

Toward the end of the third quarter, both industrial production and domestic consumption showed improvement. Output in industrial enterprises rose by 5.5 percent in September compared with the same month last year (August: 5.2 percent). Clear signals also came from retail, whose sales increased by 1.1 percent in September compared with the previous year, after the gain in August had amounted to only 0.4 percent.

Business away from the auto market developed particularly dynamically: Excluding car purchases, retail sales in September rose by 3.9 percent compared with the same period last year - the strongest figure since October 2025. Thomas Gitzel, chief economist at VP Bank, emphasized that the Chinese growth trend thus remains on course and that urgent stimulus measures by the central bank or government are currently not necessary. Volkmar Baur of Commerzbank also sees the government as satisfied with the course of developments and for the time being expects no further major impulses, aside from interest subsidies for first-time home buyers that have already been in place since October.

Booming foreign trade intensifies international tensions

While domestic demand remains subdued, business abroad is proving to be a central pillar of support for the economy. In the first nine months, Chinese exports on a US-dollar basis rose by 21.3 percent compared with the same period last year. In September, export growth even accelerated to 36.3 percent. The main driver of this development is global demand for technology products such as semiconductors and hardware for artificial intelligence (AI).

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The immense export success gave China a trade surplus of around 938 billion US dollars (around 834 billion euros) from January to September. However, the huge surplus is increasingly causing resentment among trading partners. In Europe in particular, concern is growing that inexpensive goods from China are taking market share away from domestic manufacturers and putting pressure on industries.

Deep real estate crisis slows the domestic economy

In strong contrast to foreign trade is the persistent weakness in investment at home. The so-called fixed-asset investments in factories, machinery, buildings and infrastructure fell in the first nine months by 7.2 percent compared with the same period last year. The main reason is the profound crisis in the real estate market: Investments in real estate development collapsed by 20.6 percent from January to September.

This development is weighing on the country through several mechanisms at the same time. Declining real estate units reduce the wealth of many citizens, which leads to uncertainty and lower consumer spending. Construction companies are reducing the number of new projects and consequently awarding fewer contracts. In addition, cities and municipalities lack revenue, as the sale of land to developers had long been one of their most important sources of income.

Against this backdrop, the International Monetary Fund (IMF) has adjusted its forecasts. For the current year, the IMF expects growth of 4.5 percent; for 2027, it now forecasts only 4.0 percent. The fund warns that China must address the weakness of domestic consumption in a targeted manner, as the export boom cannot permanently compensate for the domestic problems.

With material from dpa