London, 19 October 2026 — EBM Newsdesk Analysis — By Anthony Gill
On Monday, China’s National Bureau of Statistics reported that the economy grew 4.5% in the third quarter from a year earlier, up from 4.3% in the second quarter and slightly ahead of the 4.4% economists expected. Growth over the first nine months was 4.6%, inside Beijing’s target of 4.5% to 5%. The striking detail sits underneath: exports rose 16.4% over the same period while retail sales grew just 1.1% in September. China’s factories are booming. Its shoppers are not. That pattern was already clear when Chinese exports soared 21.8% in the spring.
For Europe, that is the real headline. China’s trade surplus reached about $938bn in the first nine months of the year. Goods that Chinese consumers are not buying are being sold abroad, and Europe is one of the biggest markets left open to them. A stronger Chinese economy, built this way, means more pressure on European manufacturers rather than more demand for their products.
Strong Factories, Weak Homes
The official figures, published by Xinhua, show an economy running on two speeds. Industrial output rose 5.5% in September. High-tech manufacturing grew 14.3% over nine months, and equipment manufacturing 10.2%. Beijing says new growth industries now contribute more than 40% of growth, in line with the priorities in its 15th Five-Year Plan.
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SubscribeAt home, the picture is far weaker. Property investment fell 20.6% in the first nine months, fixed-asset investment fell 7.2% and private investment fell 10.4%. The property slump has wiped out much of the wealth Chinese families held in housing, and they are saving rather than spending. Unemployment in cities held at 5.2%.
Why Europe Should Worry
When a country this large makes more than it consumes, the surplus has to go somewhere. The United States has put up high tariffs, so more Chinese goods are heading to Europe and emerging markets. Electric cars, solar panels, batteries and machinery are the obvious examples.
Brussels is already pushing back. It has just struck a deal to shield hybrid carmakers from Chinese imports, and trade tensions are rising. But Europe is also deeply dependent on China for supply chains and critical materials. France, Germany and the UK rank among the most China-exposed nations on earth. China has shown it will use rare earths as leverage when it is pushed.
That leaves Europe in a bind. It needs Chinese inputs, but it cannot let cheap Chinese finished goods hollow out its own industry.
Where I Land
These are respectable numbers that hide an unbalanced economy. The IMF expects 4.5% growth this year, at the bottom of Beijing’s range, and has called for more support for household spending and an end to the property slump. That is the right advice. Beijing keeps choosing factories over families.
As long as it does, China will keep exporting its slowdown. For European companies, the threat is not that China is weak. It is that China is strong in exactly the industries Europe is trying to build. I expect more EU trade defences over the next year, more Chinese retaliation, and more European firms caught between the two.
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