China’s tech bet fall short of filling property hole, report says
A tower crane stands above residential buildings in an urban area in the afternoon light on January 9, 2026 in Chongqing, China.
Cheng Xin | Getty Images News | Getty Images
BEIJING — China’s push into high-tech industries is not big enough to offset the collapse in the country’s real estate market and leaves the economy more vulnerable to trade tensions, U.S.-based research firm Rhodium Group said in a report Monday.
The report stated that from 2023 to 2025, new industries such as artificial intelligence, robotics and electric cars added only 0.8 percentage points to economic output, while real estate and other traditional sectors experienced a total decline of 6 percentage points. The analysis was based on official Chinese data and industry-specific sources.
The findings come as China seeks to increase technological self-sufficiency in response to US restrictions. Under its five-year development plan, which begins in earnest in March, Beijing is doubling down on advanced technologies with state investment and positive policies.
“China’s growth strategy is not going to work,” Logan Wright, a partner at Rhodium and a co-author of the report, told CNBC. “They will not achieve the targeted GDP growth rates based on the policies they have outlined so far.”
Beijing has been targeting annual GDP growth of around 5% in recent years. For China to maintain this pace, new industries will need to grow sevenfold over the next five years to account for the roughly 2 percent of annual investment growth required, Rhodium estimates.
This means an additional 2.8 trillion yuan of new investment is needed this year; This is 120% more than in 2025. Investment in artificial intelligence or robotics could increase in the next year or two, but other emerging sectors are unlikely to sustain such rapid growth, analysts said.
“Electric vehicles have arguably achieved the fastest growth rates, and production in the sector may be slowing in the coming years,” Rhodium said in its report.
Property drift deepens
While Beijing prioritizes Thanks to advances in high technology, fewer steps have been taken to address the years-long collapse in real estate. The sector once accounted for more than a quarter of the economy. New home sales by floor area fell to the same level last year Not seen since 2009According to a report from China Real Estate Information Corp last week.
But sighs have emerged in recent weeks that some policymakers are considering stronger property support. China’s top leaders will formalize this year’s economic goals at the annual parliament meeting in March.
In the macro outlook published by global investment firm KKR, real estate weakness is forecast to reduce China’s GDP growth by 1.2 percentage points this year. Despite an estimated 2.6 percentage point contribution from digital technologies, the estimated total growth was still low at 4.6%.
“Despite the potential 5% growth target for 2026, negativities from real estate and the weak job market cast doubt on its accessibility,” the report stated. KKR predicts property shortages will halve in 2027 but sees limited recovery in digital industries or consumer demand.
From jobs to trade tensions
An overemphasis on technology may have broader economic consequences.
Rhodium analysis found that new industrial sectors may offer higher wages but employ far fewer people than traditional industries.
Increased factory automation and China’s already high 30% share of global manufacturing output could lead to job losses of up to 100 million over the next decade, exceeding the total workforce of most advanced economies, KKR said.
China’s urban unemployment rate remains unchanged over 5% Youth unemployment was nearly three times higher for most of last year.
Because domestic investment is unlikely to generate sufficient demand, even in newer industries, “Beijing will become even more dependent on gaining market share in export markets,” the Rhodium report said.
“China will remain even more dependent on exports in the future, leaving the economy vulnerable to new trade restrictions,” the report said.
As low-priced Chinese goods, including electric vehicles, spread abroad, Mexico and the European Union have joined the United States in increasing tariffs on imports from China.
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China’s economic disparity mirrors similar disparity in the United States, where AI-related companies are leading stock market gains. other parts of the economy We struggled.
But many in Beijing argue that the country’s long-term interests are at stake.
Zhang Jianping, deputy director of China’s Ministry of Commerce, told CNBC last week that the country’s policies are designed to support innovation for many years to come. He added that traditional industries such as steel and real estate need to integrate new technologies to remain competitive.
