IMF raises global growth forecast: China's wider contribution

Editor's note: Li Lun, a special commentator for CGTN, is an assistant professor of economics at Peking University. The article reflects the author's opinions and not necessarily the views of CGTN.

The International Monetary Fund (IMF) and World Bank Group began their annual meetings in Bangkok, Thailand, on October 12, with the global economic outlook once again in focus. In its October 2026 World Economic Outlook (WEO), the IMF raised its forecast for global economic growth this year to 3.1%, up slightly from its July projection of 3.0%. While the revision suggests that the global economy has shown resilience in the face of mounting challenges, the outlook remains fragile. 

Strong investment in artificial intelligence (AI) is helping offset the economic drag from the conflict in the Middle East and higher energy prices, but persistent geopolitical uncertainty, inflationary pressures and rising debt continue to weigh on growth. Moreover, the benefits of this resilience are unevenly distributed, leaving many economies vulnerable to further shocks.

Against this backdrop, China's economy is projected to grow by 4.5% in 2026, significantly outpacing the global average. But the significance of China's growth extends beyond its own economic performance. Through its vast domestic market, industrial upgrading and technological innovation, China creates opportunities for producers and investors worldwide, including in developing economies across Southeast Asia, Africa and Latin America. Understanding these channels helps explain how China's economic expansion can contribute to growth well beyond its borders.

China's contribution to global growth operates through three connected channels: domestic market demand, industrial upgrading and innovation. Domestic demand sustains orders for foreign producers; industrial upgrading reduces investment costs for foreign businesses; innovation creates markets for foreign technologies and services. Together, these channels connect China's growth to employment, capital formation and productivity in partner economies.

China's domestic market provides a substantial source of demand for economies integrated into its production and consumption. In the first eight months of 2026, its merchandise imports reached 14.61 trillion yuan ($2.1 trillion), up 22% in yuan terms, while purchases from ASEAN's member countries increased by 20.3%.  

As Chinese factories acquire foreign components and raw materials, and households buy imported goods and services, these purchases support revenues and employment abroad. Access to China's large domestic market can also make investment in specialized production more viable, allowing foreign suppliers to develop capabilities that a smaller domestic market might not sustain.

Industrial upgrading extends this contribution by making the technologies used in production more affordable. For businesses with limited access to finance, lower equipment costs can determine whether an investment will proceed.  

Battery packs for electric vehicles and energy storage show how manufacturing advances can lower investment costs. Their average price per kilowatt-hour fell by 8% globally in 2025, partly reflecting improved manufacturing efficiency. With China producing more than 80% of the world's lithium-ion batteries that year, its manufacturing capabilities matter for the affordability of these technologies worldwide. The WEO points out that better storage and renewable energy deployment can reduce vulnerability to commodity shocks. Deployment also creates demand for engineering, installation and maintenance.

Innovation can broaden demand by giving familiar products new functions and enabling new uses. In China, retail sales of smart wearable devices, including smart glasses, more than doubled in the first half of 2026, supported in part by consumer subsidies. New digital products and AI applications require chips and other specialized inputs, creating opportunities for foreign suppliers.  

China’s National Bureau of Statistics links this technological expansion to increased demand for imported intermediate goods. China's integrated-circuit imports illustrate this demand: Their value rose by 55.1% year on year in the first eight months of 2026. Foreign suppliers can benefit as Chinese innovation generates demand for components, software and supporting services.

Continued opening helps foreign businesses turn these opportunities into lasting commercial relationships. China's revised foreign investment catalog encourages participation in advanced manufacturing, technical services and scientific research, widening opportunities for foreign expertise.  

Plans issued this year to open up the service sector in nine more cities extend access to Chinese customers, enabling foreign firms to develop local service networks. Predictable market access and consistent regulation give investors confidence to commit capital to these activities. Together, wider access and reliable rules can help convert market opportunities into sustained investment and closer relationships with Chinese customers and suppliers.

These connections become more valuable when the global economy faces disruption. The WEO warns that prolonged conflict in the Middle East could intensify energy pressures, while disappointment over AI returns could weaken investment and tighten financial conditions. Renewed trade restrictions could also limit access to customers and affordable inputs.  

Against these pressures, demand from Chinese customers can sustain foreign producers' revenues, while access to Chinese equipment can make investment more affordable. China's manufacturing capabilities can also help trading partners diversify energy supplies and reduce dependence on volatile fossil fuel markets.

Looking ahead, the WEO recommends further rebalancing China toward domestic consumption to reduce external imbalances. Stronger household demand would expand opportunities for foreign suppliers of food, consumer goods and services, while supporting the Chinese businesses that purchase imported inputs.  

As household incomes rise, more spending on travel, healthcare and other services could widen the scope for international participation. A growing domestic customer base can also sustain investment when external conditions deteriorate, giving China's trading partners a more dependable source of demand.

China's contribution to global growth therefore combines the purchasing power of its domestic market, the investment opportunities created by industrial upgrading and the new demand generated through innovation. As trading partners expand production and earn additional income, their purchases from China and other economies can grow in turn. Policies that strengthen Chinese household incomes and widen foreign participation would reinforce this interaction, enabling China's expansion to support a broader and more resilient global economy.

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