China's third-quarter growth picks up to 4.5%, but investment and housing keep shrinking

China's economy grew 4.5% in the third quarter from a year earlier, a little faster than economists expected and up from 4.3% in the second quarter, the National Bureau of Statistics said on Monday, Oct. 19, Beijing time. Factory and services output grew steadily and exports surged, but investment kept shrinking, and property investment was down 20.6% for the year so far.

Where the 4.5% came from

The bureau's preliminary estimate puts gross domestic product for the first nine months of 2026 at 107.11 trillion yuan, up 4.6% from a year earlier at constant prices. Growth ran at 5% in the first quarter and 4.3% in the second, the slowest since the end of 2022, before recovering to 4.5% in July through September. On a seasonally adjusted basis the economy expanded 1.2% from the second quarter, faster than the 0.9% pace three months earlier.

Both readings were slightly better than forecasts. A Reuters poll of 50 economists had pointed to 4.4% year-on-year growth and a 1.1% quarterly gain, and a survey by Chinese data provider Wind had a consensus of 4.41%.

Industry was the standout. Value added at larger industrial companies rose 5.5% in September from a year earlier, up from 5.2% in August, and 5.3% across the first three quarters. High-tech manufacturing grew 14.3% over the nine months and equipment manufacturing 10.2%. Output of industrial robots rose 29.1% and of lithium-ion batteries 39.5%. Services, the biggest part of the economy, grew 5.2%, while the secondary sector as a whole grew 3.8%, well below the pace of the larger industrial companies alone.

Trade added to the momentum. Citing customs figures, the bureau said goods exports rose 16.4% in yuan terms over the first nine months and 29.6% in September alone, while imports grew 22.3% for the period.

Investment is still going backward

The weakest part of the release was spending on factories, buildings and infrastructure. Fixed-asset investment fell 7.2% in the first nine months to 33.41 trillion yuan, the same rate of decline as through August. Leaving out real estate, it was still down 4.2%. Infrastructure investment fell 4.2%, manufacturing investment 2.1% and private investment 10.4%.

Property remains the deepest hole. Investment in real estate development fell 20.6% in the first three quarters, a steeper drop than the 19.9% decline through August. Sales of newly built commercial buildings fell 13.9% by value and 13.2% by floor space. Resales were a partial offset: floor space in second-hand housing transactions, which the bureau takes from housing ministry data, rose 10.7%.

There was one small turn. The bureau's seasonally adjusted figures show fixed-asset investment edged up 0.07% in September from August, its first month-on-month increase since February after six straight monthly declines.

Households are spending, slowly

Retail sales of consumer goods rose 1.1% in September from a year earlier, faster than August's 0.4% and above the 0.7% forecast in the Wind survey. For the nine months they were also up 1.1%, at 37 trillion yuan. Spending on services is holding up better than spending on goods: the bureau's broader measure of retail sales of goods and services rose 2.6% over the period, with services up 5% and goods up 1%.

Incomes are growing a little more slowly than output. Per capita disposable income rose 4.4% in real terms over the first three quarters, against GDP growth of 4.6%, and 3.6% for urban households. The urban surveyed unemployment rate eased to 5.2% in September from 5.3% in August. Consumer prices rose 0.9% from a year earlier in September, while factory-gate prices climbed 5%.

What it means for the target

Beijing is aiming for growth of 4.5% to 5% this year, lower than the goal of around 5% it had set in previous years. After nine months the economy is inside that range, but close to its floor.

The bureau's own assessment was guarded. After listing the gains, the release said "the international environment is complex and volatile, the issue of insufficient domestic demand remains prominent, and the foundation for steady economic growth still needs to be consolidated." It pledged to "step up efforts to boost domestic demand and improve supply."

Policy support so far has been incremental. In late September, Beijing announced targeted interest-rate cuts and mortgage subsidies, and this month it allocated 550 billion yuan in unused government debt quotas to ease local finances and support infrastructure spending. It has not released large-scale stimulus. Before the data, Goldman Sachs analysts wrote that the prospect of a second straight quarter of growth below 4.5% had increased the pressure on policymakers. The third-quarter figure takes that prospect off the table for now.

Outside forecasters see little room to spare. The International Monetary Fund this month trimmed its 2026 forecast for China to 4.5% from 4.6% and expects growth of 4% in 2027, citing sluggish consumption, weakening investment amid property-sector strains and higher global oil prices. Economists in the Reuters poll expected 4.5% growth for both the fourth quarter and the full year. "Exports seem to be the only outperformer," Guo Shan of Hutong Research told AFP before the release.

What to watch next

The quarterly figures are preliminary, and the bureau's seasonal model revises the quarter-on-quarter series as new data arrive. The fifth plenary session in late October, an expected Politburo meeting and the annual Central Economic Work Conference in December are the next places Beijing could signal more support. Economists polled before the release expect the central bank to leave its benchmark loan prime rates and banks' reserve requirement ratio unchanged through the first quarter of 2027.