China’s economy accelerated to 4.5% year‑on‑year growth in the third quarter after slowing to a three‑year low in the previous quarter. The rebound was driven mainly by exports, notably chips and other electronic components used in artificial intelligence development and the construction of AI data centres.
The Q3 outcome still trails the 5% growth recorded in the first quarter and represents the lower bound of the country’s annual growth target. Stronger exports could push China’s trade surplus close to record levels; the article notes the difference between exports and imports may exceed last year’s peak of $1,200 billion.
What is supporting expansion?
Demand abroad for hardware needed for AI infrastructure is the main support for Chinese manufacturers. Large technology firms worldwide are investing heavily in data centres and related capacity, increasing the need for chips and electronic parts produced in China. Domestic consumer spending, by contrast, remains subdued.
The property sector remains a major drag
One of the economy’s most severe problems is the prolonged crisis in the property market. In the first nine months of the year, real estate investment fell by more than 20% compared with the same period a year earlier. Years of overbuilding and heavy indebtedness among developers mean a sustained recovery is not yet visible. Weak wage growth, high youth unemployment and economic uncertainty are also dampening household willingness to spend.
In September, Beijing announced further stimulus measures, including reductions in interest burdens for some businesses and support for homebuyers, but the impact of these steps is not yet clear.
Questions over sustainability
A second risk to sustainable growth is whether the large sums that technology companies are spending on AI infrastructure worldwide will generate sufficient long‑term returns to sustain demand. If those investments underperform, export demand could weaken.
At the same time, the United States and the European Union have increasingly criticised Chinese exports, arguing that lower‑cost Chinese goods create competitive pressure on local manufacturers. In sum, exports—especially AI‑related hardware—are currently powering China’s growth, but persistent property market problems and uncertainty about the long‑term profitability of AI investments leave that growth vulnerable.
