China's Faltering Tech Economy in Two Charts
[Opinion] There's a lot of activity in China's technology industry. But that doesn't equate to healthy or sustainable output. There’s echoes of the nation’s property sector
Good Morning from Taipei,
China’s latest economic growth figures raise doubts about whether the country will hit official targets for the full year. Year-to-date GDP climbed 4.8% through September, so it’ll take a big final quarter to hit the 5% goal.
The most likely way for Chinese policymakers and industry leaders to stretch the numbers will be through pump-priming production. It’s quicker, more direct, and more controllable than doling out money to spur consumption.
The beauty of this approach is that investing in fixed assets counts toward economic activity, as does making stuff. Yet, neither of these two steps require the products to actually be sold, let alone used.
That’s exactly the vibe in China’s tech sector right now: buy equipment and churn out products, but don’t worry about selling them. The country is famously trying to juice its chip sector (aka integrated circuits), and its new-energy vehicle industry is a source of national pride. As a result, we can expect to continue seeing the biggest growth in those two categories.
But China’s flailing property sector is a brutal reminder that supply can exceed demand for only so long before troubles emerge.
Thanks for reading.
Exclusive News & Insights You May Have Missed:
nice one. would love to see more on 3d printers
This is a bad strategy when the goods from "new productive forces" have a much shorter shelf-life than things like steel or property. If an EV or a chip sits for a year in a market where people are swapping them out for the newest goods in 3 years, you're either taking a bath on those goods or not selling them at all.