These high-tech companies will likely reboot the economy in a way not seen before, with effects cascading to most sectors of the economy, especially the positive wealth effect propagating beyond 2026. It will comfortably take up the slack arising from the soft property market, assuming that it will not recover by then, significantly mitigating the chilling effect of that weighty problem on China’s economic vitality.
While we concur with the minority view that high-tech industries and manufacturing will take over from real estate in powering China’s economic growth from 2026, we will go out on a limb and say that it could drive a decade-long bull run in the stock prices of China’s companies helmed by well-educated, intelligent scientists and engineers full of irrepressible entrepreneurial drive.
High-tech industries — not to be confused with e-commerce firms thin on both technology as well as investments, tangible assets, and R&D spend — are set to take over from a rapidly contracting real estate market as the largest sector of the economy by 2026. They will account for almost a quarter of China’s GDP, according to Bloomberg Economics (see chart “China’s innovative sectors set to fill property’s hole”).
