China is pushing technology hard to keep its economy alive, but a report released Monday by US-based Rhodium Group said the country’s move toward high‑tech growth cannot cover the damage caused by the property collapse.
From 2023 to 2025, new sectors like AI, robotics, and electric vehicles added only 0.8 percentage points to China’s economic output, while real estate and other traditional industries fell by a combined 6 percentage points, according to the report.
Beijing is pushing this tech strategy as it tries to limit its reliance on foreign suppliers after U.S. restrictions. A new five‑year development plan, expected to fully roll out in March, focuses on advanced technologies through state funding and policy support. At the same time, China has kept its annual GDP growth target near 5%, a level that now looks harder to reach.
Tech investment targets fall short of what growth math demands
Rhodium said new industries would need to grow seven times larger over the next five years to deliver the roughly 2 percentage points of annual investment growth needed to hit that GDP target. That requirement translates into 2.8 trillion yuan in fresh investment this year alone. That amount is about 120% more than investment levels in 2025.
The report said spending on AI and robotics could rise over the next year or two, but most emerging industries are unlikely to keep that pace. The scale needed is simply too large. The imbalance looks similar to what is happening in the United States, where AI‑linked companies have driven stock market gains while other parts of the economy lag behind.
Zhang Jianping, a deputy director at China’s Commerce Ministry, said last week that policies are meant to support innovation over several years. After his first mention, Zhang said traditional sectors like steel and real estate must bring in new technology to stay competitive. “The policies support innovation over multiple years,” Zhang reportedly said.
The report warned that leaning too hard on tech comes with costs. New industrial sectors often pay higher wages, but they employ far fewer people than traditional industries. According to Rhodium, this matters in an economy where jobs still anchor social stability.
Job losses and export dependence raise trade risk
Factory automation is already rising, and China holds about 30% of global manufacturing output. Combined, those trends could lead to the loss of up to 100 million jobs over the next decade, according to KKR. That figure would exceed the total workforce of most developed economies.
Labor data already shows pressure. China’s urban unemployment rate stayed above 5% for much of last year. Youth unemployment ran at roughly three times that level. With domestic demand weak, Rhodium said internal investment will not be enough to absorb production. “Beijing will become even more dependent upon gaining market share in export markets,” the report said. It added that China will be more reliant on exports, leaving the economy exposed to new trade restrictions.
Those restrictions are arriving fast. As lower‑priced Chinese goods, including electric vehicles, have expanded overseas, Mexico and the European Union have joined the United States in raising tariffs on imports from China.
Some analysts still see limited support from policy tools. China’s trade‑in program, extended in late December, expanded subsidies to AI glasses and some smart home products, while narrowing the list of eligible appliances. “The trade‑in program favors white goods,” HSBC analysts said last Thursday.
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Source: https://www.cryptopolitan.com/chinas-tech-led-economic-growth-hits-limits/
