High-tech growth falls short of replacing real estate
China’s strategy of expanding high-tech industries such as artificial intelligence, robotics and electric vehicles is not sufficient to counterbalance the prolonged downturn in its property sector, according to a report published by U.S.-based research firm Rhodium Group.
The study found that between 2023 and 2025, new technology-driven industries contributed just 0.8 percentage points to economic output, while real estate and other traditional sectors recorded a combined decline of six percentage points. The analysis is based on official Chinese data and industry-level sources.
Ambitious growth targets under pressure
Beijing has increasingly focused on technological self-reliance as it faces export controls and trade restrictions from the United States. Under a new five-year development plan expected to be reinforced from March, authorities are channeling state investment and policy support toward advanced technologies.
However, Rhodium estimates that to sustain China’s targeted annual GDP growth rate of around 5%, investment in new industries would need to expand roughly sevenfold over the next five years. That would require an additional 2.8 trillion yuan in new investment this year alone, equivalent to a 120% increase compared with 2025 levels.
While sectors such as artificial intelligence and robotics may continue to grow in the short term, analysts warn that electric vehicles have likely already reached peak growth, limiting their future contribution.
Property weakness remains a major drag
Despite the emphasis on technology, policymakers have taken relatively limited action to stabilize the real estate market, which once accounted for more than a quarter of China’s economy. New home sales fell last year to levels last seen in 2009, highlighting the depth of the downturn.
Global investment firm KKR estimates that property-sector weakness will subtract 1.2 percentage points from China’s GDP growth this year. Even with a projected 2.6 percentage point boost from digital industries, overall growth is expected to remain below official targets.
Employment risks and rising trade exposure
The report also highlights employment challenges. High-tech industries tend to offer higher wages but employ far fewer workers than traditional sectors. Increased automation could displace up to 100 million manufacturing jobs over the next decade, exacerbating labor market pressures.
With domestic demand unlikely to absorb rising production, China is expected to rely even more heavily on exports. This dependency increases vulnerability to further trade restrictions, as lower-cost Chinese goods continue to face higher tariffs in the United States, the European Union and Mexico.
Chinese officials argue the strategy prioritizes long-term competitiveness, emphasizing that traditional industries must integrate new technologies to remain viable.
