China: Slowing growth puts targeted policy in focus – HSBC

China’s GDP growth reached 4.5% in Q3 2026, with stronger September activity providing support, although weak domestic demand and investment continued to hold back the economy, according to HSBC analysts reviewing the latest macroeconomic data. Their assessment points to resilient exports and high-tech sectors, alongside a K-shaped recovery in consumption and cost-push reflation. The report’s view is that policymakers will favour targeted fiscal measures rather than broad-based stimulus in 2026.

Growth holds up despite domestic pressures

"China’s GDP growth improved to 4.5% in Q3, up from 4.3% in Q2. However, recent data continue to signal domestic headwinds, despite relative resilience in high-tech industries and the external sector. One particularly puzzling feature has been the contraction in fixed asset investment."

"Consumption is displaying a K-shape divergence. Policymakers are shifting away from shortterm, cyclical consumption fixes towards addressing deeper structural constraints in the domestic economy (NDRC, 13 April)."

"Initiatives to raise household incomes and strengthen consumer confidence include improvements to public service provision, expanded social safety net coverage, and efforts to integrate migrant workers into the new urbanisation model. These measures should support a more sustainable consumption recovery over the medium to long term."

"Despite the recent slowdown, China still appears on track to meet this year’s growth target. This may limit the scope for additional broad-based stimulus in 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)