AI-linked exports lift China’s growth despite weak domestic demand
China’s economy regained some momentum in the three months to the end of September, with growth accelerating after a three-year low and landing at 4.5% in the third quarter. The improvement came as the artificial intelligence boom helped push exports higher, giving the country’s manufacturers a stronger external market even while households at home remained cautious about spending.
The figure sits at the lower edge of Beijing’s annual growth target of 4.5% to 5%. In practical terms, that leaves policymakers with room to keep supporting activity without appearing to miss the official range, but it also shows how dependent the recovery remains on sectors outside domestic consumption. High-tech production and overseas demand have become the clearest engines in an economy still trying to move past a prolonged property slump.
China’s National Bureau of Statistics said the economy “sustained steady development against pressure” and showed “momentum with new growth drivers and improving structure.” The phrasing is telling. Growth is no longer coming from broad-based domestic confidence; it is being pulled by industrial output, technology-linked shipments, and a trade surplus that keeps widening.
One sentence captures the entire problem: exports are doing the heavy lifting while consumer demand stays soft.
High-tech manufacturing is carrying more of the load
Sales of high-tech goods rose 14.3%, and production of batteries and industrial robots increased by more than 29%, according to official figures. Those numbers point to a manufacturing base that is increasingly oriented toward advanced industrial supply chains, especially products tied to data infrastructure, automation, and the wider AI buildout. Global demand for computer chips and other components used in AI data centres has helped cushion the drag from weaker spending inside China.
This is not a purely cyclical rebound. It reflects a structural shift in what China is selling abroad and how its industrial machine is being used. As firms around the world rush to build out computing capacity, Chinese suppliers have found demand for the hardware, components, and industrial systems that sit behind that investment wave. In the near term, that has supported output and exports at a moment when many other parts of the economy are under strain.
Oxford Economics researcher Sheana Yue said manufacturing and high-tech exports have boosted growth, even as investment and domestic spending remain weak. Her assessment fits the data: the external sector is offsetting weakness elsewhere, but only partially. The support comes from a narrow channel, and a narrow channel can close quickly if trade friction intensifies or AI spending slows.
Property investment remains a major drag on activity
The property market continues to weigh heavily on the broader economy. Property investment fell by more than 20% in the first nine months of the year from the same period last year, official data showed, a sharp drop that reflects years of overbuilding and excessive borrowing by private developers.
That decline matters because property has long served as a central pillar of Chinese growth, household wealth, and local government financing. When that pillar weakens, the effects spread well beyond construction sites. Household confidence suffers, credit demand softens, and spending decisions become more defensive. Weak wage growth and high youth unemployment are reinforcing that caution, leaving consumers unwilling to spend as freely as policymakers would like.
There are still no signs that the property downturn has reached a stable floor, Yue said. For the moment, the sector remains a persistent brake on broader demand, and no amount of export strength can fully replace the lost momentum from real estate-linked activity.
Beijing’s support measures have yet to show a clear effect
In September, Beijing unveiled a package of support measures that included lower interest rates for some businesses and subsidies for property buyers. The aim was straightforward: steady confidence, support borrowing, and keep the economy from slipping further. So far, the effect is difficult to see in the headline numbers.
Dave Chia, an economist at Moody’s Analytics, said the targeted measures for businesses have yet to be seen in the data. His concern is sharper than a simple caution about timing. China’s current growth pattern rests heavily on what he described as a “single external engine” in exports, which leaves the economy exposed if foreign demand softens or trade barriers rise.
That vulnerability is already visible in tensions with Western economies, including the US and European Union, where manufacturers are struggling to compete with large volumes of cheap Chinese goods. Trade frictions can blunt export gains even when production is strong, and geopolitical uncertainty can alter investment decisions long before they appear in official statistics.
AI investment is a support and a risk
The technology industry has become one of the main drivers of China’s growth in recent quarters, and AI sits at the center of that momentum. Demand for chips, servers, batteries, and industrial equipment has fed through to export performance and factory output, helping keep the economy above water. For Beijing, this is a welcome source of growth because it aligns with policy goals of upgrading industry and moving toward higher-value production.
Yet the AI push carries its own uncertainty. Billions of dollars are being spent on data centres and related infrastructure, but questions remain about whether the companies making those investments can generate the profits needed to justify the scale of the spending. If those returns disappoint, the current boom could cool quickly, leaving China with stronger industrial capacity but less durable demand than policymakers need.
China’s latest growth reading is best understood as a recovery powered from the outside in. Exports, high-tech manufacturing, and AI-related demand are doing what consumer spending and property investment are not. The open question is how long that balance can hold if trade tensions intensify and domestic demand stays muted.