China: Q3 growth supported by robust exports - Standard Chartered

Q3 GDP growth beat market expectations on resilient exports and robust production. Domestic demand weakened in Q3, led by plunging investment, Standard Chartered's economists report.

Resilient exports offset weak investment

"China's GDP expanded 4.8% y/y in Q3, beating the market estimate of 4.7%. A breakdown by components revealed mixed signals. Exports were resilient, with net exports contributing 1.2ppt to headline GDP growth (Figure 1) while investment plunged, with weakness broadening beyond the housing sector. Consumption softened as the effectiveness of the goods trade-in programme faded, as expected."

"We upgrade our 2025 growth forecast to 4.9% (from 4.8% previously) given better-than-expected Q3 growth, but we keep our Q4 growth forecast at 4.4% y/y. September data points to continued domestic demand weakness, especially in investment, which has prompted more fiscal-supportive measures. However, overcapacity management and an uncertain global environment could delay investment plans in the near term."

"On the external front, we think China's tariff truce with the US will be extended further as both countries have economic incentive to arrive at a truce, with the door kept open for negotiations. However, China may demand more than a tariff truce extension this time, and ask the US to loosen export controls and roll back other restrictions, in exchange for a relaxation in its rare earth export controls. Given China's dominance in the rare earth supply chain and as it could take the US years to develop significant production outside China, mutual trade concessions are likely in order to avoid a complete disruption of upcoming negotiations."