China's economy showed signs of recovery in the third quarter of 2026, with gross domestic product (GDP) growth accelerating to 4.5% compared to the same period last year. This marks an improvement from the previous quarter’s 4.3% increase, which had been the slowest pace since 2022 when the economy was severely affected by the Covid-19 pandemic.

The latest figures, released Monday, place China’s growth at the lower end of the government’s annual target range of 4.5% to 5%. Despite this modest rebound, the domestic economy continues to face significant challenges, including high levels of debt and weak consumer confidence. These issues have heightened China’s reliance on exports as a primary driver of growth.

In the third quarter, China's exports surged, playing a key role in supporting the economy. September alone saw exports climb by over 33% year-on-year, with shipments to Europe increasing by 25% and to the United States by 40%. This export boom has pushed China’s trade surplus to $938 billion for the first nine months of the year, positioning the country to surpass last year’s record surplus of $1.19 trillion.

The growth in exports is closely linked to global demand for advanced technology products, particularly those related to artificial intelligence. The surge in demand for chips and other tech equipment necessary for data centers and expanded computing capabilities has boosted China’s manufacturing sector significantly.

However, the rapid expansion of Chinese exports has also escalated tensions with key trading partners, who are facing difficulties competing with the influx of Chinese goods. This dynamic continues to complicate international trade relations and may influence future economic policy decisions.

Overall, while China’s economy is demonstrating resilience through a strong export performance, underlying domestic issues remain a concern, and the balance between sustaining growth and managing internal vulnerabilities poses ongoing challenges for policymakers.