China's National Bureau of Statistics has published the results of the economy for the 3rd quarter. Year-on-year, growth was 4.5% and, compared to the previous quarter, 1.2%. The official target for the year is in the range between 4.5 and 5% and is likely to be achieved. These figures may seem low compared to past performance, especially before the Covid-19 epidemic, but the size of the Chinese economy is much larger and the increase in absolute value of activity remains very significant.
China is therefore holding up well despite a very unfavourable international environment with rising fossil fuel prices, stagnation in Europe, which has long been an essential market for its companies, and the tariff increases decided by the US president. But the engine of its growth is no longer the same. Domestic demand remains disappointing. Household consumption of goods grew by only 1.1% year-on-year compared to services by 5% and investment fell by 7.2%, largely due to the consequences of the deep real estate crisis, which is still far from over with sales falling by 13%.
Industrial production, on the other hand, continues its strong growth with +5.3% and even an acceleration in September with +5.5% year-on-year. It is increasingly supported by exports and a new surplus record is expected to be broken in 2026 with more than 1300 billion dollars with a balance of 133 billion in September. The negative interpretation of these figures according to which they are the consequence of insufficient domestic demand should not be retained. It is indisputable that the Chinese government has so far failed to revive domestic demand. But companies do not reason this way.
Export successes come from the profound transformation of the Chinese industrial model. The era of the country as the "factory of the world" is over. Its companies are now capable, especially in sectors with a high technological content, of competing with the best. The country has trained hundreds of thousands of engineers and has become the world leader in patent filings. The Shenzhen region is a new California. Secondly, industry has a huge domestic market, which is a powerful factor in cost reduction. Chinese groups are now able to compete with the firms to which they had long been simple suppliers. The case of the automobile industry is revealing.
The discourse according to which export successes are the consequence of the failure of an economic policy that fails to revive domestic demand is fallacious, as is the comparison with Japan, which failed to overcome its own real estate crisis during the 90s and has stagnated since. China, on the other hand, is still experiencing growth close to 5%. The only common point between the two Asian giants is the low birth rate, which Beijing has not managed to redress despite the end of the one-child policy.
Unlike Western countries, inflation has remained below 1% this year. The government sees this as recognition of its action. The country had long since built up large stocks of fossil fuels, considering that a crisis would occur sooner or later. Faced with tensions on the markets, it has drawn on its reserves, which has allowed companies to suffer much lower cost increases in industry (2.3% over one year) than their foreign competitors. This, too, has contributed to the growth of exports.
The intense diplomatic activity in the service of the country's development is another explanation for the success of the companies. In the 1990s, Japan had never tried to increase its political and economic influence in the world to support its growth, if only because it had little chance of doing so. The memory of its role during the Second World War was present, and the establishment of healthy relations with its Chinese neighbor was not, and still is, not among its priorities.
After the reforms initiated by Deng Xiao Peng in the 80s and 90s that would generate the country's economic boom, a new era opened with the coming to power of Xi Jinping. The New Silk Road project, renamed the "Belt and Road Initiative", was the starting point for the establishment of new relations with countries around the world, neighbors in Asia, then Africa and now even Latin America. By financing vast infrastructure programs, often having them carried out by its companies, Beijing has created close ties with these countries, which has favored exports and even allowed Chinese groups to invest and produce in these countries to meet their needs and even to re-export.
China's creation or participation in new international organizations such as ASEAN, OPEC or the Shanghai Cooperation Organization has further increased its influence, dethroning Western countries from the role they had assigned themselves for more than half a century. This is also the real source of the exceptional growth in Chinese foreign trade, with exports and imports with these countries increasing by 19% since the beginning of the year.
Finally, which is also favourable to its growth, China wants to play a stabilising role in the world economy by seeking to conclude agreements with each country where everyone would win. This is the difference with the American attitude based on the permanent outbreak of trade conflicts, even if it means going back on the clock by reducing the announced customs duties, for example. When Donald Trump threatens, Xi Jinping proposes solutions to the differences or common projects where everyone would win, this is the "win-win" strategy.
Beijing's message, unlike that of the White House, is that a stable multilateral trade system that is conducive to growth for all is possible, that supply chains must be secured and that this can be achieved through negotiations. The great paradox is that the defence of globalisation is no longer the mission that historically capitalist nations have set for themselves, but the one that China has set itself as a priority in its international relations, which will not prevent its president from meeting his American counterpart for the third time this year.
The new Chinese model is no longer based solely on the growth of its companies thanks to its vast domestic market and its efforts to research new technologies and the design of new products or new production techniques. It is based, and for this it has the support of its leaders, on a redefinition of China's place in the world economy. This helps to mitigate the consequences of the tensions encountered, but it is not limited to that. It will continue even if the difficulties are overcome.
Europe has still not understood the nature of this transformation. Rather than imitating the protective American attitude, it is urgent to find new areas of cooperation. Rather than talking about a slowdown in Chinese growth or stigmatising its trade surpluses, the time has come to understand that the world economy is changing and that China will play an increasing role in it to benefit from it and not to fear being a victim of it.