Tech export boom will not cure China’s sick economy
State-of-the-art industries such as AI, robotics and EVs are unlikely to solve growth problems
China’s high-tech revolution will fail to solve the problems lingering from a crippling property slump. Exporting its way out of economic stagnation will only trigger brutal trade wars, a major report by the Rhodium Group revealed this week.
In a shocking set of numbers based on official Chinese data and industry-specific sources, the study makes bleak reading. State-of-the-art industries, such as AI, robotics and electric vehicles, added just 0.8 percentage points to economic growth in the past three years.
During the same period, the real estate and legacy industrial sectors plunged by a combined six percentage points. The New York-based think tank also sounded the alarm on Beijing’s new five-year development plan, which will be rolled out in March.
“China’s growth strategy isn’t going to work. They’re not going to achieve their targeted rates of GDP growth based on the policies they have outlined so far,” Logan Wright, a partner at Rhodium and a co-author of the report, told CNBC.
Figure it out:
- The study, entitled China’s “New” Strategic Industries Will Not Produce 5% GDP Growth, warned of the dangers ahead to its self-reliance policy.
- The world’s second-largest economy “will remain even more reliant upon exports in the future,” leaving it “vulnerable to new trade restrictions.”
Overall, China’s economy is in a transitional phase
China Business Spotlight
Delve deeper: “China’s past economic performance has clearly been overstated, particularly since the decline of the property sector in 2022,” the Rhodium report stated, a veiled reference to what China Factor has been reporting for the past three years.
Between the lines: By using “self-deception,” Xi’s regime has been able to hide the stench of stagnation amid rampant deflation and anemic domestic demand. Evaporating household wealth and rising unemployment have only added to an economic “doom loop.”
Big picture: “Overall, China’s economy is in a transitional phase. This shift is boosting exports and parts of industry, but it is no substitute for a sustainable domestic market,” China Business Spotlight reported earlier this week.
Bottom line: “[But] as long as consumption and household confidence [struggle], the recovery will remain vulnerable. Structural reform is progressing, but without a broader demand base, it lacks the foundation for lasting stability,” it stated.
China Factor comment: In the end, President Xi Jinping and the ruling Communist Party are only interested in pushing the line of an economic and high-tech superpower. Even if that means dumping critical economic data points, which do not back up that narrative.