China seeks new economic drivers

Faced with a slowing real estate market, China is accelerating its shift to strategic industries such as electric vehicles, robotics and semiconductors. This is seen as an important step to help the country's economy break through, aiming to become a high-income country.

View of a cargo port in Qingdao, Shandong province, China. Photo: THX/TTXVN

According to Oilprice.com, in the context of a declining real estate market, China is implementing a strong transformation strategy, focusing its economic development on new core industries such as electric vehicles, robots and semiconductors. This strategy is considered an important step to bring this country from a middle-income economy to a high-income country.

Sharukh Malik, director of the Guinness Greater China Foundation, said that at its peak, real estate accounted for 20-30% of China's GDP. However, that figure has been falling significantly, causing major impacts on the economy. In response to this situation, the Chinese government has made policy adjustments, helping the real estate market show positive signs of recovery last fall.

However, the policy easing has only partially released pent-up demand, but has failed to sustain growth momentum as consumer confidence remains weak, according to Xin-Yao Ng, co-director of Abrdn's Asia Focus Trust. In fact, many cities, especially lower-tier cities, have returned to negative growth recently.

Faced with this situation, the Chinese government is redirecting a large amount of credit from the real estate sector to new industries. Expert Malik analyzed: "China's GDP per capita is currently at $12,000. To increase this figure to $30,000, China cannot rely on real estate or traditional sectors such as video games or e-commerce, but must focus on new core industries."

For his part, Qian Zhang, an investment specialist at Baillie Gifford China Growth Trust, said Chinese companies are becoming more competitive on a global scale. From home appliance maker Midea to battery maker CATL to electric carmaker BYD, they are all taking the lead in their respective fields. In particular, Western restrictions on semiconductors have spurred collaboration among domestic companies, helping to create new industry leaders.

In terms of the stock market, after three years of decline, Chinese stocks have made a positive recovery in 2024, outperforming most other emerging markets.

Experts are quite optimistic about the challenge posed by the new US tariff policy. Although US President Donald Trump has announced a 10% tariff on all goods from China, expert Malik believes that this may just be a negotiating tactic. He commented: "If the tariffs are applied strongly, this will greatly affect American consumers. Moreover, weakening the Chinese economy will have a huge negative impact on global growth."

Many Chinese companies have been preparing for this scenario for years, moving factories and operations out of China. In fact, despite the initial trade war in 2018, the Chinese market maintained its growth momentum until mid-2021, when policies related to the COVID-19 pandemic and tightening of management began to negatively impact investor confidence.

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