China growth rebounds to 4.5 percent in the third quarter on an export boom, while shoppers at home keep their wallets shut

The headline number beat the forecast by a tenth of a point, and the figures underneath it describe two different economies. China gross domestic product grew 4.5 percent in the third quarter from a year earlier, the National Bureau of Statistics said on Monday, against a Reuters poll forecast of 4.4 percent and up from 4.3 percent in the April to June quarter, which had been the weakest pace in more than three years, as of October 19. On a quarterly basis the economy expanded 1.2 percent. For January to September, growth was 4.6 percent, inside the government annual target of 4.5 to 5 percent.

The engine is exports. Industrial output rose 5.5 percent in September from a year earlier, the fastest since March, while the January to September trade surplus reached 938.11 billion dollars, putting China on track to pass last year record surplus of about 1.2 trillion dollars. The global artificial intelligence boom is doing real work in that number, pulling Chinese chips and electronics components into data centers on every continent, and it has kept growth afloat through a tariff offensive from Washington that is now on pause and a war in the Gulf that has raised costs everywhere else.

The other economy is the domestic one. Retail sales rose 1.1 percent in September, better than August 0.4 percent and better than forecast, and still a fraction of the factory pace. Fixed asset investment fell 7.2 percent in the first nine months, and property investment fell 20.6 percent in the same period, in a housing downturn now in its fifth year in a country where an estimated 70 percent of household wealth sits in property. Weak demand at home has pushed manufacturers into price wars and payroll cuts, and pushed exporters to abandon the home market entirely where they can.

Analysts quoted by Reuters expect Beijing to reach its annual target without aggressive new stimulus, helped by a strong start to the year and recent modest support, including expanded help for home buyers and 550 billion yuan, about 82 billion dollars, in unused government debt quotas steered to local governments. External demand is still keeping the economy afloat, one economist put it, and broad easing is unlikely while growth sits on target. A two speed economy can run for a long time. The question the rest of the world is asking is what happens to trade politics when the fast half of China economy keeps taking market share from everyone else factories while the slow half buys so little back.