BEIJING, Oc 19 — China's economy grew slightly more than expected in the third quarter, but today's figures still came in at the lower end of the government's full-year target, as the global energy shock and weak domestic demand countered surging exports.

The world's second-largest economy has charted a diverging path in recent years, with an AI-fuelled export boom masking the impact of a persistent real estate crisis and gloomy consumer sentiment.

Gross domestic product expanded 4.5 per cent in July-September, according to the National Bureau of Statistics (NBS).

The reading was an improvement on the previous quarter's 4.3 per cent expansion and just ahead of the 4.4 per cent predicted in an AFP poll of economists.

Beijing is targeting annual growth of 4.5 to 5.0 per cent this year, its lowest goal in decades.

NBS deputy head Mao Shengyong described the international context as complex and volatile during a news conference following the data's publication.

He added that domestic demand was insufficient.

In late September, Beijing rolled out mortgage subsidies for certain home purchases and support for infrastructure investment, seeking to boost the economy as activity flagged.

While consumer activity has been a drag this year, separate data released roday showed retail sales rose 1.1 per cent last month, the fastest pace since March.

However, Zhiwei Zhang, chief economist at Pinpoint Asset Management, said economic momentum remained subdued in September.

After adjusting for inflation, real retail sales barely grew compared with a year earlier, he wrote.

Zhang added that the better-than-expected GDP figures could dissuade the government from making significant policy shifts in the fourth quarter to achieve its annual targets.

Industrial production grew 5.5 per cent year-on-year in September, the NBS said, up from 5.2 per cent the previous month.

The increase was helped by strong foreign demand, wrote Nguyen Hoang Nam of Capital Economics.

Rebalancing needed

Fixed-asset investment, however, sank 7.2 per cent over the first nine months of the year, the data showed.

China, the world's largest importer of crude oil, is under pressure from higher energy costs caused by the Iran war, which has disrupted shipping from the oil-rich Gulf.

Higher energy prices, along with protracted uncertainty and structural headwinds, prompted the International Monetary Fund last week to slightly downgrade its projection for China's economic growth this year to 4.5 per cent.

Economists say China must shift towards a growth model powered more by domestic consumption than traditional drivers such as construction, property development and exports.

That long-awaited rebalancing has yet to materialise, the IMF's Asia and Pacific department director, Krishna Srinivasan, said at a press conference in Bangkok last week.

Exports, for decades the engine of China's economy, remain a bright spot.

Figures released last week showed a surge in overseas shipments had put the country on course for another record trade surplus, exceeding last year's US$1.2 trillion.

The export boom has been underpinned largely by strong global demand for AI-related products, including computers, semiconductors and data centre equipment.

But China's soaring trade surpluses are stoking tensions with key trading partners, including the European Union and the United States.

Talks this month between EU trade chief Maros Sefcovic and his Chinese counterpart Wang Wentao ended with an agreement to limit exports of Chinese hybrid vehicles to Europe.

Many critics contend that Beijing's extensive subsidies for domestic industries in recent years have given them an unfair advantage in foreign markets.

Weak domestic demand has also exacerbated the problem, as manufacturers increasingly look overseas for new growth. — AFP