Chinese GDP grew 4.5% in Q3

CHINA FINANCIAL - Report 19 Oct 2026 by Michael Pettis

Special points to highlight in this report:

* China’s record-breaking trade surplus reflects weak domestic demand, not export strength. While many analysts are describing China as having a two-track economy, with a strong export sector and weak domestic demand, this is not the right way to describe the economy.

* Surging net exports do not necessarily mean a healthy or profitable manufacturing sector. Subsidies, cheap credit and rising debt can keep production going even when returns are inadequate. China’s export competitiveness must therefore be distinguished from the economy’s ability to generate sufficient returns on the resources devoted to production.

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