Real GDP grew 4.5% y/y, up from 4.3% in Q2, while nominal GDP hit 6.0% — the fastest pace since 2022.
But fixed asset investment — long a bulwark of economic growth — shrank.
And China’s punchy nominal GDP figure was driven by cost-push inflation from the Iran war, which inflates the value of activity without adding any volume.
Meanwhile, final consumption — a measure of household and government spending — accounted for just 46.7% of economic growth so far this year, the lowest share since 2013.
That leaves one pillar holding up the whole show: the trade surplus.
The difference between what China exports and imports hit a record USD 365 billion in Q3.
In September, exports grew 36.3% y/y, the fastest pace since 2013 (pandemic years aside).
But this fantastic trade performance is driven by price, not volume:
Semiconductor exports rose 136% in value in September — but only increased 2% in volume.
Mobile phone export values rose 14%, while the number of units shipped fell 13%.
Despite the doom and gloom, China’s economy will comfortably hit its annual growth target of 4.5–5%, with GDP up 4.6% y/y so far this year. A slew of policy support unveiled in late September will help carry it over the line.
But while China’s growth target is safe, the patience of its trading partners is another matter.
China’s monthly surplus with the US hit USD 34 billion in September, a 20-month high, while its surplus with the EU reached a record USD 34.8 billion.
In short, China’s headline growth will be fine — as long as the rest of the world keeps buying.
Joe Peissel, Lead Macroeconomist
What you missed
US-China
Chinese and American officials are reportedly engaged in “intense negotiations” on a list of concrete outcomes for the upcoming meeting between Xi Jinping and US President Donald Trump on the sidelines of the APEC summit in Shenzhen next month.
The US-China Board of Investment (BoI), announced during Trump’s visit to Beijing in May, is reportedly high on the list of proposals.
Econ and finance
The People’s Daily ran an essay by former IMF deputy managing director Zhu Min arguing that China and the rest of the world both need RMB internationalization.
Zhu calls for ‘further improvement of the capital management framework,’ with no mention of convertibility, which aligns with Beijing’s preference for expanding the RMB’s global role without relinquishing control over capital flows.
The commerce ministry (MofCom) and eight other agencies issued guidelines on using technology to boost domestic consumption.
The guidelines outline ways companies can leverage AI and emerging technologies to make products more attractive, including by providing better goods and more customized services.
But bureaucrats are poorly placed to tell companies how to innovate. Firms selling into China’s ultra-competitive consumer market already have every reason to supply what shoppers want, and the new guidelines add little to that incentive.
Corporates
MofCom and the science ministry (MoST) released a revised draft catalogue of technologies subject to export controls, including sweeping restrictions on solar manufacturing technologies.
The proposed controls target key technologies and manufacturing processes for upstream polysilicon, wafers, and cells — the highest-barrier segments of the supply chain where China controls ~90% of global capacity.
Tech
The draft export-control catalogue also added 23 AI technologies.
Export bans would cover technology behind models trained on nationally sensitive “core data,” and AI tools that generate malicious code or evade cyber defenses.
The industrial ministry’s (MIIT) think tank warned in its annual embodied AI report that “bubble risk is accumulating” in China’s humanoid robot sector.
The report called the bubble a necessary stage of development, likening it to the dot-com bust and the 2015-2018 EV shakeout, and predicted market competition to clear out weak firms within three years.
Net zero
Green fuels became the latest target of Beijing’s anti-involution drive.
A deputy director at the macro planner (NDRC) said: “The NDRC is drafting a plan to guide the rational siting of major projects in response to investment overheating across certain segments of the hydrogen industry.”
As always, it was a busy week in China.
Thank goodness Trivium China is here to make sure you don’t miss any of the developments that matter.