China's Q3 GDP growth at 4.5%: exports and high-tech manufacturing lead as domestic demand splits

| Growth recovers but stays near the lower end of the target

Third-quarter growth of 4.5% improved on the second quarter, and the first nine months came in at 4.6%, close to the lower end of the full-year goal. The source of growth shifted noticeably. Net exports supplied close to 40% of the quarter's expansion, a sharp rise from the previous quarter, while consumption contributed nearly half and investment added only a small share.

| Exports carry the quarter

Goods exports grew by roughly a fifth over the first nine months, and quarterly export value passed 8 trillion yuan for the first time. September was particularly strong, helped by shipments delayed by August typhoons, front-loading ahead of the National Day holiday and a low base a year earlier. Those one-off factors are expected to fade.

Underneath the headline, growth is concentrated in technology supply chains. Integrated circuit exports roughly doubled, exports of computing equipment rose by more than half, and vehicles, ships and power equipment also expanded quickly. Labor-intensive goods rebounded in September, but much of that reflects shipments catching up after the typhoon disruption and does not signal a broad recovery in overseas demand. Refined oil product exports also climbed by more than a third over the period, a trend worth tracking for fuel markets.

| Industry splits between advanced manufacturing and traditional materials

Industrial output growth edged up in September, led by equipment and high-tech manufacturing, which grew at double-digit rates for the year. Output of industrial robots, lithium-ion batteries and 3D-printing equipment rose strongly. Traditional materials moved the other way, with crude throughput, steel and cement output all lower. Capacity utilization shows the same divide, as electronics and general equipment run well above building materials, autos and chemicals.

The manufacturing PMI returned to just above 50 in September, with the production index at its highest of the year. New orders lagged output, which suggests part of the gain reflects quarter-end scheduling and inventory timing. Energy-intensive industries remained in contraction, and smaller firms stayed below the expansion line.

| Upstream prices surge while downstream stays under pressure

Producer prices rose at the fastest annual pace in more than four years in September, driven by oil and gas, coal and non-ferrous metals. Midstream and downstream prices stayed weak, so input costs keep outrunning selling prices at most manufacturers. AI-related demand has yet to change this pattern in any meaningful way.

Earnings follow the same split. Electronics manufacturing delivered most of the growth in industrial earnings, with upstream sectors such as non-ferrous smelting, coal and chemicals also posting large gains. Ferrous metals, building materials and autos remain under pressure. Chemicals show the gap clearly, since earnings jumped while output barely grew, which points to price effects more than stronger demand.

| Domestic demand moves in two directions

Consumer spending is increasingly K-shaped. Services retail sales grew at a healthy clip, while goods sales barely moved. Communication equipment and online spending held up, and electric vehicles reached a record two-thirds of passenger-car retail sales in September. Furniture and building materials fell sharply on the property slump, and home appliances weakened as trade-in subsidies faded.

Fuel is where this matters most. Retail sales of conventional fuel cars dropped steeply in the third quarter, and gasoline and diesel consumption both declined on the back of high pump prices and electrification. Fixed-asset investment also remains negative for the year, with property investment down by around a fifth. High-tech manufacturing investment is growing, and tenders for computing and data infrastructure point to more equipment purchases in coming quarters. Infrastructure funding is moving faster than construction, and a visible pickup in physical activity may not arrive until the fourth quarter or early 2027.

| Energy and chemicals read-across

The quarter's energy data reinforce the structural shift. Crude throughput and crude imports both fell by double digits year on year, while ethylene output rose strongly as petrochemical capacity expanded. In power, wind and solar generation grew by about a fifth, nuclear also rose, and thermal and hydro output slipped.

| Outlook for the final quarter

International institutions broadly expect full-year growth of 4.5% to 4.6%. Easing China-U.S. trade tensions, the extension of the reciprocal-tariff suspension into 2027 and holiday restocking could support exports, while faster special-purpose bond issuance may lift infrastructure activity. The main risks are a high comparison base and front-loaded shipments, which could push exports lower on a quarterly basis in the upcoming months, and a K-shaped domestic recovery that emerging industries are still too small to offset.

Third-quarter growth looks firmer on the surface than it is underneath. Exports and high-tech manufacturing are doing the heavy lifting, while property, traditional materials and goods consumption stay weak. For energy and chemicals players, that means rising upstream prices alongside falling fuel demand, and a final quarter that depends on whether export momentum holds and infrastructure funding turns into real construction.

The above content is the major conclusions and highlights extracted from the "Q3 GDP Growth at 4.5%: Exports and High-Tech Manufacturing Lead, Domestic Demand Diverges" chapter of the latest China Policy Perspective (produced by GL Consulting).

The full chapter includes quarterly GDP contribution data, export breakdowns by product category, PMI and industrial output trends, producer price and earnings comparisons by sector, detailed consumption and investment indicators, and the latest GDP forecasts from major institutions.

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