From government bureaucracy, the SOEs, to the regulatory architecture, the structure of taxation, and the state-owned banks acting as the government’s “policy arm”, China’s investment-led growth model is embedded in the country’s DNA. As of 4Q 2024, investment’s share of government spending was close to a record high. And now – according to Premier Li Qiang – it needs to change.
The biggest bombshell from the National People’s Congress? In my view, China’s announcement it was “vigorously” shifting its focus from investment-led to consumption-led growth. This is big. And it’s bold. It’s like the All Blacks abandoning rugby and switching to soccer. Or Arsenal switching to cricket. Or the New York Yankees switching to basketball. I mean, sure, it’s possible but not at all easy.
Let me explain. For the past 20 years, China’s growth model has been resolutely and overwhelmingly investment led. In many respects they wrote the playbook. They are the masters at super-charging both domestic and externally led growth via typically government-supported, state-owned enterprises (SOEs). In the world, there’s no one better.
