Economy set to maintain steady growth, say experts

China's economy is expected to maintain steady growth in the third quarter, supported by resilient industrial production and exports, while stronger policy efforts to boost domestic demand will be crucial to sustain the recovery and meet the country's full-year growth target, economists said.

They also said the economy continues to benefit from the expansion of high-tech manufacturing and robust external demand, but subdued domestic spending and a prolonged downturn in the real estate sector underscore the need for further policy support to achieve more balanced growth.

Ahead of Monday's release of GDP data for the third quarter, economists pointed to signs of improving economic activity in September, with Wen Bin, chief economist at China Minsheng Bank, citing resilient industrial production and brisk exports as key factors supporting growth.

The official manufacturing purchasing managers' index rose to 50.1 in September, marking a return to expansion in factory activity after two months of contraction, the National Bureau of Statistics said. The reading suggests that industrial output growth picked up to around 6 percent year-on-year in September, Wen said.

High-tech manufacturing remained a mainstay of industrial growth, with its PMI holding above 52 throughout the third quarter and standing at 52.5 in September.

Meanwhile, robust external demand for high-tech products, fueled by the global investment boom in artificial intelligence, provided fresh momentum to exports. Overall exports rose 21.3 percent year-on-year in US dollar terms in the first nine months, up from 17.6 percent in the first half, according to the General Administration of Customs.

Exports are likely to remain a key engine of growth for the rest of the year, said Lynn Song, chief economist for China at Dutch bank ING.

A recent poll conducted by media group Caixin found that forecasts for China's third-quarter growth averaged 4.4 percent year-on-year, up slightly from 4.3 percent in the previous quarter.

However, domestic demand remained subdued, with economists expecting fixed-asset investment to have contracted further in the first nine months as the property downturn showed little sign of easing.

The International Monetary Fund trimmed its 2026 growth forecast for China on Tuesday by 0.1 percentage point to 4.5 percent in its latest World Economic Outlook, pointing to higher oil prices as a further drag on sluggish domestic demand.

Zhu Min, former deputy managing director of the IMF, said that assessing China's economy requires looking not only at the pace of growth but also at the structural changes underway, with new growth engines already gathering momentum.

The transition will take time, but structural changes will lead to a healthier and more stable economy, he added.

Zhu Feng, chief China economist and head of Greater China Economic Research at investment bank JPMorgan, said that those new industries remain too small to quickly replace the contribution once made by the property sector and related industries.

Policymakers have stepped up efforts to shore up domestic demand as the economy shifts toward new growth drivers.

In late September, authorities announced a targeted lending rate cut and mortgage subsidies, following the State Council's pledge to roll out "a package of practical and effective incremental policies" to help meet the full-year growth target of 4.5 to 5 percent.

More recently, the Ministry of Finance allocated 550 billion yuan ($82.17 billion) in unused local government debt quotas to shore up county and county-level district finances and support investment.

"The additional funding, coupled with faster fiscal spending since the third quarter, will further support fourth-quarter GDP growth and should secure full-year growth of at least 4.5 percent," said Xiong Yuan, chief economist at Guosheng Securities.

Luo Zhiheng, chief economist at Yuekai Securities, said growth could pick up further if policy support gradually feeds through to employment, household incomes, consumption and business investment.