China's economy expanded 4.5% in the third quarter from a year earlier, slightly faster than economists expected and a pickup from the 4.3% pace of the previous three months, as factories and technology services made up for a deepening slump in construction.

The National Bureau of Statistics said on Oct. 19 that gross domestic product rose 1.2% from the second quarter on a seasonally adjusted basis, up from 0.9% in the April-to-June period. Analysts had forecast year-on-year growth of 4.4%, according to Italian business daily Il Sole 24 Ore and a consensus calendar published by Kaohoon International.

Growth for the first nine months came to 4.6%, with output totaling 107.11 trillion yuan. That keeps the world's second-largest economy inside the government's 2026 target range of 4.5% to 5% with one quarter left in the year.

The figures confirm a split economy. Manufacturing value added rose 5.9% in the third quarter and information technology services grew 9.8%, while construction contracted 4.4% and real estate shrank 0.4%, according to the bureau's detailed preliminary accounts, published Oct. 21.

Factories and technology carry the load

Industry grew 5.2% in the quarter. Leasing and business services posted the fastest expansion of any sector at 12.9%, and hotels and catering rose 6.3%, the bureau's accounts showed.

Over the first nine months, high-tech manufacturing output climbed 14.3% and equipment manufacturing rose 10.2%. Production of industrial robots jumped 29.1% and lithium-ion batteries 39.5%, bureau data showed.

Mao Shengyong, deputy head of the statistics bureau, said new growth drivers led by advanced manufacturing, the digital and intelligent economy and modern services contributed more than 40% of growth in the first three quarters, China Daily reported. He also said economic output rose by 5.7 trillion yuan over the period, the largest gain for a comparable stretch in five years, according to EconoTimes, which cited a State Council website report.

Trade added further momentum. Goods exports rose 16.4% in yuan terms over the first nine months, and September shipments jumped 29.6%, the bureau said.

Prices also turned more helpful for companies. The GDP deflator, a broad measure of prices across the economy, rose 1.5% year on year in the third quarter, its second consecutive positive reading, China Daily reported. Chen Mengyun, a macroeconomic analyst at Shenyin & Wanguo Futures, said the price recovery should support corporate earnings and nominal growth, according to the newspaper.

Domestic demand remains the weak spot

The statistics bureau struck a cautious tone of its own. In its Chinese-language statement, it said the problem of insufficient domestic demand remained prominent, the international environment was complex and changeable, and the foundation for steady improvement still needed to be consolidated.

Fixed-asset investment fell 7.2% in the first nine months, dragged down by a 20.6% drop in real estate development spending. Retail sales of consumer goods rose 1.1% over the same period, and the surveyed urban unemployment rate was 5.2% in September.

Some economists expect a firmer finish to the year. Wang Qing, chief macroeconomic analyst at Orient Golden Credit Rating International, forecast fourth-quarter growth of around 4.7% as growth-stabilizing policies take effect and said there was still room for steps including broad interest-rate cuts, China Daily reported.

Guo Liyan, deputy director of the Economic Research Institute at the Chinese Academy of Macroeconomic Research, called for closer policy coordination to make use of the fourth-quarter construction window, with money from new policy-based financial instruments reaching projects faster, according to the same report.

What to watch

The International Monetary Fund cut its 2026 growth forecast for China to 4.5% on Oct. 13, Hurriyet Daily News reported. That would put full-year growth at the bottom of Beijing's range and imply a slower fourth quarter than the first nine months.

The People's Bank of China kept its benchmark loan prime rates unchanged the day after the data, leaving the one-year rate at 3.0% and the five-year rate at 3.5%. Trading Economics said the stronger-than-expected third quarter eased the pressure for fresh stimulus.

The Communist Party's Central Committee is scheduled to meet in Beijing from Oct. 26 to 29, although its official theme is party discipline rather than economic policy, Reuters reported. Investors will also watch October trade, price and activity data in the coming weeks for signs of whether the export boom and the factory-led recovery can carry into the final quarter.