AI demand lifts China's exports but property slump persists

China's economic growth picked up in the three months to the end of September, rebounding from a three-year low as the artificial intelligence boom helped lift exports.

Official data showed the world's second-largest economy grew by 4.5% in the third quarter, up from the previous period but below the 5% expansion recorded between January and March. The figure sits at the bottom end of Beijing's annual growth target of 4.5% to 5%, a range analysts say gives policymakers room to address the country's economic challenges. While exports have offset weak spending at home, global trade tensions and uncertainty over AI investment are clouding the outlook.

The National Bureau of Statistics said on Monday that the economy "sustained steady development against pressure" and showed "momentum with new growth drivers and improving structure". Sales of high-tech goods rose by 14.3%, while production of both batteries and industrial robots grew by more than 29%. With exports climbing, China's trade surplus—the value of goods and services sold abroad compared with what it buys from other countries—is on track to overtake the record $1.2tn (£900bn) seen last year.

Sheana Yue, a researcher at Oxford Economics, said manufacturing and high-tech exports had boosted growth despite weak investment and domestic spending. But property investment fell by more than 20% in the first nine months compared with the same period last year, official data showed. China's economy has struggled to shake off a long-running property slump following years of overbuilding and excessive borrowing by private developers, and Yue said there were still no signs the trend would end soon. Trade uncertainties and geopolitical issues had also made Chinese consumers more pessimistic and unwilling to spend, she added.

Dave Chia, an economist at Moody's Analytics, said the effects of Beijing's targeted support measures for businesses had yet to be seen, and warned that several risks stood out from the data, including China's reliance on a "single external engine" in exports.

The technology industry has been a key driver of growth in recent quarters. Global demand for computer chips and other components used to build AI data centres has helped ease pressure on Beijing and cushion the impact of sluggish domestic consumption. Chinese businesses have leaned heavily on exports as a prolonged property slump, weak wage growth and high youth unemployment weigh on consumer spending at home.

In September, Beijing unveiled a raft of support measures, including lower interest rates for some businesses and subsidies for property buyers, in an effort to boost the economy. But it faces a backlash from Western economies, including the United States and the European Union, as manufacturers struggle to compete with large volumes of cheap Chinese goods. There are also concerns over the billions of dollars being spent on AI infrastructure, and whether the companies making those investments can deliver on their promises of generating huge profits.