China’s economy slowed in the summer as global demand for its exports faltered and the ailing property sector sank deeper into crisis, the government said Wednesday.

The world’s second-largest economy expanded at a 4.9% annual pace in July-September, beating analysts’ forecasts of about 4.5%, official data show. But that was much slower than the 6.3% annual growth rate of the previous quarter.

The Chinese government has acted to help the economy with various policies, raising spending on building ports and other infrastructure, cutting interest rates and easing curbs on home-buying. But economists say wider reforms are needed to address long-term problems that are stifling growth.

Officials from the National Bureau of Statistics cautioned that global realities were becoming “more complex and grave” and warned that demand from Chinese consumers and businesses has not bounced back as much as hoped for after the pandemic.

Stephen Innes, managing partner at SPI Asset Management, said that although the numbers beat expectations China’s economy is “not out of the woods by any means.”

“This growth suggests a modest improvement in the Chinese economy. However, there are ongoing calls for increased policy support to maintain consistent growth, as there are concerns about the sustainability of the recovery,” Innes said in a note.

On a quarterly basis, the economy grew by 1.3% in the third quarter, compared to the 0.8% growth seen in the April-to-June quarter.

The drop in growth also reflected base effects, given that in April-June of 2022 China was enduring the worst of its stringent anti-virus shutdowns, and that exaggerated the pace of growth in the last quarter, Julian Evans-Pritchard of Capital Economics said in a report.

Still, he noted that Capital Economics’ gauge of business activity showed growth slowing in July-September, though there were signs of improvement, mainly driven by consumer spending.

For the first nine months of the year, China’s economy grew 5.2% compared to the same period last year, suggesting it is on track with Beijing’s target of about 5% growth for 2023.

The ruling Communist Party has in the past decade deliberately sought to shift away from a reliance on government-led investment in massive infrastructure projects to one that is driven more by consumer demand as is typical of other major economies.

Slowing growth reflects that effort to attain a more sustainable path to affluence, but the disruptions from the pandemic and a crackdown on excessive borrowing by property developers have accentuated underlying weaknesses.

With unemployment rising and foreign investment slowing sharply, the government has adopted the classical approach of raising spending, while saying it would focus on clean energy and other improvements.

Oxford Economics’ China economist Louise Loo said that the third quarter data showed that a “stimulus-led cyclical pickup in China was underway.”

Retail sales rose 5.5% in September from a year earlier, beating expectations as consumers splurged ahead of a week-long Golden Week holiday in early October.

Industrial output, which measures activity in the manufacturing, mining and utilities sectors, rose 4.5% in September from a year earlier – on par with the month before.

Fixed-asset investment – spending on factory equipment, construction and other infrastructure projects to drive growth – still grew only by a tepid 3.1% in the first nine months of the year, compared with January-September 2022.

“Property indicators remained very weak in September, with no signs of bottoming out,” said Loo said.

She said it would be challenging to maintain momentum in this quarter given weak prospects for a revival in the real estate sector.

China’s trade data, released earlier this week, showed that exports and imports continued to decline although they contracted at a slower rate than previously.

Earlier this year, the economy revived as people flocked to shopping malls and restaurants after nearly three years of “zero-Covid restrictions were removed late last year. But the rebound flattened sooner than expected.

Last week, the International Monetary Fund cut growth forecasts for China, predicting economic growth of 5% this year and 4.2% in 2024, down slightly from its forecasts in July.

The IMF attributed its downward revision to weaker consumer confidence, subdued global demand and a crisis in the property sector that has made a big dent in business activity.

“At the moment, the economy is very investment heavy,” Thomas Helbling, deputy director of the IMF’s Asia and Pacific Department, said in an online briefing.

Beijing needs to ensure more equal competition for state-owned and private businesses, encourage more service industries and ensure a stronger social safety net, he said. And investing in education, technology and pension reforms is crucial as China’s population ages.

“If you do those reforms there is an upside to growth,” Helbling said.