China beats growth forecasts on AI-fuelled export surge

China's economy grew 4.5 percent between July and September, the National Bureau of Statistics reported on Monday, beating forecasts and accelerating from the second quarter's 4.3 percent. The number was carried by exports, which surged by more than a third in September on shipments of electronics tied to the global AI buildout.

The composition matters more than the headline. Manufacturing output grew 6.0 percent in September, buoyed by export demand for electronics, AI-related equipment and autos, according to Duncan Wrigley, chief China economist at Pantheon Macroeconomics. Retail sales gained 1.1 percent, up from 0.4 percent in August — an improvement that still leaves consumption growing at a fifth of the pace of factory output. Industrial production rose 5.5 percent, helped along as coalmines resumed operations after safety inspections prompted by a major accident. Property investment fell 20.6 percent over the first nine months of the year, and fixed-asset investment dropped 7.2 percent. Analysts at ABN Amro attribute the growth pickup mainly to export strength from the global AI and tech boom, more than offsetting drags from the Iran conflict and ongoing weakness in domestic demand.

The result puts Beijing on track to hit its 2026 growth target of 4.5 to 5 percent without extra stimulus measures. Wrigley expects policymakers to conclude that their efforts to stabilise headline growth in the third quarter were successful. Hi-tech manufacturing continues to outperform traditional sectors as China climbs the value-added ladder, while the domestic consumer stays on the sidelines.

The industrial dividends of the AI buildout — the servers, the electronics, the equipment that data-centre operators abroad are ordering — are landing in Chinese factories. Growth of 4.6 percent over the first nine months of the year arrived with property investment down a fifth and the country's own households barely increasing their spending.

In September, Chinese factories made 5.5 percent more than a year earlier, and Chinese shoppers bought 1.1 percent more. The difference crossed a border.