Investments in new industries are propelling growth---real estate is old news.

Myth 2: China’s Real Estate Crisis Threatens Future Growth Momentum

Real estate remains a crucial pillar of the Chinese economy, especially as projections suggest that over the next decade, a staggering 100 million people will migrate to urban areas, driving demand for real estate development.

Nevertheless, the significance of real estate in China’s economy is waning, with the high housing price bubble gradually deflating. It is true that commercial housing sales plummeted from 18 trillion yuan in 2021 to 11.7 trillion yuan in 2023. But China’s private investment also surged by 9 percent in 2023 with the burgeoning so-called “new three” industries – solar power, electric vehicles, and batteries – compensating for real estate’s sluggish growth.

First, the photovoltaic industry has seen remarkable growth, with the Chinese market expanding by over 20 percent in the last decade, boasting a market size of about 2 trillion yuan and over 50 percent of the global market share.

Second, new energy vehicles recorded total sales of approximately 5 trillion yuan in the Chinese automobile market. In 2023, after nine consecutive years as the world’s largest car production and sales hub, China emerged as the world’s leading car exporter.

Third, China dominates the lithium battery market, with its companies occupying six spots among the world’s top 10 power battery manufacturers and commanding a market share of 62.6 percent.

According to analysis by the Finnish Energy and Clean Air Research Center, the pan-clean energy industry has become the primary driver of China’s economic growth, contributing to 40 percent of GDP growth in 2023, marking a 30 percent year-on-year increase.

Compared to the United States and Europe, China’s new economy not only serves as a vital alternative to real estate for economic growth but also significantly contributes to mitigating global warming. The shift away from real estate dependence and the upsurge in new manufacturing highlight China’s high-quality economic development, a facet often overlooked in the more fevered discussions of “Peak China.”

Recent years have seen the ascent of China’s emerging industries, propelling a comprehensive transformation of the industrial landscape. Those who have actually been to China marvel at its e-commerce, 5G society, and seamless transportation.

In 2022, the added value of China’s “new three” economy, characterized by novel industries, formats, and business models, surged to 21 trillion yuan. The shift signifies China’s departure from a more traditional reliance on real estate as the primary driver, embarking on a trajectory of innovation-led growth.