China boosts investment in high-tech

China’s leaders, determined to upgrade manufacturing, are steering money toward makers of high-tech products, from semiconductors to EVs

Lending data from China’s central bank offers a glimpse of government priorities: as of the end of September, outstanding loans to the troubled property sector fell 0.2% year-on-year but lending to the manufacturing sector jumped 38.2%.

Economists caution that this wave of investment differs in key respects from an earlier capital investment surge that, among other effects, inflated China’s solar panel industry, triggered a trade fight and put scores of companies out of business.

But the trend has alarmed some key trading partners, particularly in Europe where an investigation into Chinese EV subsidies is underway.

“There is lower consumption in China right now but you have massive overcapacity that is being pushed out to the world, including in batteries, solar and chemicals,” said Jens Eskelund, president of the European Chamber of Commerce in Beijing.

“Europe and China are like two trains that are going to collide,” Eskelund said, referring to trade.

China’s industrial policy will be on the agenda at this week’s meeting of the Asia Pacific Economic Cooperation (APEC) forum in San Francisco, where Chinese President Xi Jinping is expected to meet U.S. President Joe Biden.

Under Xi, China has sought to make itself an advanced manufacturing powerhouse for high-end goods for the world, including EVs, wind turbines, aerospace components and advanced semiconductors.

Critics say the push has come at the expense of another need – to get China to consume more and export less, a structural shift many economists see as key to preserving high levels of growth.

Reuters/Hauwa Abu