A survey shows that China’s GDP growth for the third quarter is expected to be 4.4%, below the lower limit of the annual target, with a worsening trend of K-shaped economic differentiation. The International Monetary Fund (IMF) released a new book analyzing the Chinese economy, stating that misallocation of capital has been inhibiting productivity growth.
According to reports from Nikkei Chinese Net on October 6th, the Nikkei Economic News and Nikkei QUICK News conducted a written survey of economists responsible for the Chinese economy, receiving responses from 28 individuals. Economists predict that China’s GDP growth rate for the third quarter of this year will range from 4.0% to 4.8% on an annual basis, with an average forecast of 4.4%, slightly higher than the actual growth rate of 4.3% in the second quarter. However, it is expected to remain below the lower limit of China’s annual economic growth target range of 4.5% to 5.0% for two consecutive quarters.
The average expectation for China’s annual economic growth rate from this survey is 4.6%, which is consistent with the survey three months ago. Most economists believe that the Chinese government will maintain the lower limit of the 4.5% annual growth target through fiscal spending and loose monetary policies.
The report quoted Sally Greig, the Global Bond Manager of Baillie Gifford, who pointed out that “the slowdown in domestic demand in China in July to September exceeded expectations.” In August, the total retail sales of consumer goods increased by 0.4% year-on-year, lower than the 0.6% growth rate in July. The effects of policies such as replacing old appliances with new ones have weakened.
Song Lin, Chief China Economist at ING, mentioned that the slump in the real estate market has impacted consumer and investment sentiment, becoming the major factor dragging down the economy. At the same time, residential inventory remains high, and the recovery of investment will take time.
Hideki Ito, Chief Researcher at Mizuho Bank (China), stated that without additional economic stimulus measures, China’s annual economic growth rate will only reach 4.3%.
The survey also indicates that as high-tech industries such as semiconductors and AI continue to develop, the gap may further widen. Many economists have mentioned the issues of economic K-shaped differentiation and employment pressure.
Official data shows that China’s economic K-shaped division has intensified, with semiconductor companies’ net profits increasing by 7.2 times, while performance in domestic demand-related industries has declined. Among them, the financial reports of Chinese home appliance companies for the period January to June 2026 revealed that 4 out of 7 companies experienced profit declines. Demand for air conditioners and refrigerators has decreased, leading to intensified price competition among companies.
Despite the Chinese government’s subsidies for replacing old appliances, data from Beijing Oviyun Cloud Big Data Technology Company indicates that the Chinese home appliance retail market has seen a year-on-year decline since July to September 2025, with four consecutive quarters of negative growth by June 2026.
Economists, including Krishna Srinivasan, Director of the Asia-Pacific Department at the International Monetary Fund (IMF), who recently released the book “Towards a New Growth Model for China”, analyzed that the increasing misalignment of capital between enterprises and industries has been inhibiting productivity growth, with the growth of high-productivity emerging and private enterprises slowing in recent years.
IMF believes that although new technologies such as artificial intelligence can enhance productivity, fair competition and corporate vitality are equally important. The Chinese authorities must improve the allocation of economic resources in the future to create space for new growth drivers.
IMF states that in the coming years, the focus will be on transitioning the economy from investment to consumption, avoiding excessive tightening by local governments, and ensuring fiscal sustainability. Shifting more fiscal resources from low-efficiency investments to social security can reduce residents’ savings demand and increase consumption.
IMF also calls for reducing people’s worries to encourage them to spend, especially by increasing targeted spending on rural medical care and social security. Increasing these expenses can significantly reduce the savings rate of rural residents. IMF research shows that in urban areas, speeding up household registration reform is needed, as the floating population without urban household registration usually has a higher tendency to save due to limited access to social welfare benefits.