China's economic growth in the third quarter of 2024 surpassed expectations, with the National Bureau of Statistics reporting a 4.5% year-on-year increase. This marks an improvement from the 4.3% growth recorded in the second quarter. The stronger-than-anticipated performance has positioned China to meet its 2026 growth target of 4.5%-5% without additional stimulus.
Industrial production saw a notable rise, increasing by 5.5% in September, compared to 5.2% in August. Meanwhile, retail sales only grew by 1.1%, a modest increase from 0.4% in August. Analysts attribute this divergence to the robust export demand for high-tech products, including AI-related equipment and automobiles, which have been bolstered by global interest in artificial intelligence.
Duncan Wrigley, chief China economist at Pantheon Macroeconomics, noted that the government's efforts to stabilize growth in the third quarter appear to have succeeded. He highlighted that the recovery in industrial production was partly due to resumed coalmine operations following safety inspections. Additionally, manufacturing output growth remained strong at 6.0% year-on-year, driven by export demand.
Despite the positive growth figures, challenges persist. Fixed-asset investment fell 7.2% over the first nine months, with property investment declining sharply by 20.6%. Infrastructure spending also remained weak, indicating ongoing structural issues in the economy. Analysts from ABN Amro emphasized that the recent GDP pickup is largely due to the global AI/tech boom, which has offset the drag from domestic demand weakness and geopolitical tensions.
The export surge, which saw China's exports rise by over a third in September, underscores the country's growing role in the global tech supply chain. This development highlights both the opportunities and the vulnerabilities of China's economic model, which continues to rely heavily on export-driven growth.