Sometimes the results are tragicomically bleak. The north-western industrial city of Lanzhou has invested in commercial space flight and a “drone economy” project even as it struggled to pay its bus drivers for several years (asking them to take out personal bank loans to tide them over). Even bustling coastal provinces are not immune. When local reporters recently visited AI parks across Guangdong, home to successful Shenzhen, they found them empty or inhabited by non-AI businesses. It is not hard to see why so many projects fail. Mr Xi’s industrial policy promotes fierce competition in which companies and their host places, sometimes down to city districts, duke it out. This competitive pressure pushes down prices and elevates quality. The best businesses which emerge from this free-for-all, like BYD in carmaking, Huawei in electronics or Xiaomi in both, are formidable and ready to take on the world. They are also rare—and concentrated in established commercial centres, with deeper talent pools and pockets. Profits are even rarer. Investment returns accrue less to individual companies and more to integrated supply chains, which lower costs and speed up product cycles and innovation, says Chi Lo of BNP Paribas, a bank. The share of industrial firms generating losses has shot to a record high of

around 32% in April, up from 10% in 2011 and above the previous peak during the Asian financial crisis in 1998 (see chart 1). Corporate debt is also high and rising (see chart 2). Mark Williams of Capital Economics, a consultancy, notes that Chinese firms owe twice as much to domestic banks and bond investors today as they did in 2019. In that period GDP has expanded by a third. Companies may move away from productive activities and instead chase subsidies that are available for centrally supported sectors, he says. Partly as a result, a trio of IMF economists calculated last year, China’s “total factor productivity” (which captures how efficiently both capital and workers are used) was 1.2% lower than it would have been in the absence of industrial policy over the past decade or so. GDP was 2% lower, equivalent to forgoing around $400bn in value added each year. The more companies get caught up in the chase for subsidies and, by slashing their prices, for customers, the harder it will be for them to wring out profits. It is hardest of all for poor, out-of-the-way places like Yichun and Guizhou. Inland provinces have been generating a declining share of industrial GDP. Last year they contributed 36%, down from close to 48% in 2013, the year Mr Xi took power. This is a big problem for China’s low-skilled workforce,

which numbers somewhere between 300m and 400m people. As the state turns its attention to dominance of frontier technologies, more of them will be left behind. Many will have no choice but to return to their family homes in the countryside, says Scott Kennedy of CSIS, a think-tank in Washington. The infatuation with winning the tech race is like a spell America has unwittingly cast on Chinese leaders, notes a former adviser to the central government. The contest has warped their priorities and prompted them to focus a lot—maybe too much—on cutting-edge technology while doing too little to fix China’s persistent economic problems, the adviser adds. Robots may be multiplying but citizens remain downbeat. Retail sales grew by 0.2% year on year in April, the lowest reading since late 2022, before China had fully emerged from its devastating pandemic lockdowns. The outstanding value of household bank loans fell for the first time on record in March, compared with a year earlier. It will take a lot more than a few high- tech successes, no matter how spectacular, to lift Chinese spirits.■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/08/china-is-innovative- its-economy-is-a-mess-which-matters-more

Finance & economics | Three measures of the new three How big are China’s emerging industries? Probably not big enough to offset the drag from the old June 11th 2026 IN ECONOMICS, SIZE matters. Since 2021 Xi Jinping has steered China’s economy away from a preoccupation with property (building it, selling it and furnishing it) towards high-tech manufacturing and other “new productive forces”, as the paramount leader calls them. But are the new forces big enough to fill the gap left by the old? Economists have tried to find out. Their task is not easy, thanks to ambiguities about which industries to include, how to measure their contribution and how to fill gaps in the data. One recent attempt by Rhodium Group, a consultancy, drew on a table published by China’s National Bureau of Statistics (NBS) in November detailing the links between industries in 2023. The table’s granularity makes it one of the first data sets that can shed

light on “whether Beijing’s bet on new growth drivers is likely to pay off”, the authors note. In 2023 China’s GDP was about 130trn yuan ($18trn at the time). This was split between consumer items, exports and capital goods, which are all examples of “final” goods and services, as opposed to parts, materials and other “intermediate” goods. Only 1.44trn yuan, 1.1% of the total, was spent on new-energy vehicles (NEVs), the poster child for China’s industrial success. Property-related demand (for homebuilding and real-estate services) accounted for over 16% of GDP—despite China being two years into a property crisis. Electric-car making is, of course, not China’s only vanguard industry. People often talk of the “new three”, which also includes batteries and renewable energy. Adding these together would provide a more comprehensive measure of China’s emerging growth engines. This is where the difficulties start. Batteries, for example, are rarely a “final” good. They typically appear embedded in other products—including electric cars. Some of the 1.44trn yuan spent on NEVs, therefore, already reflects the value of the batteries inside them. Simply lumping batteries and NEVs together risks double counting.

In its measure of the new three, Rhodium Group takes care to count batteries only once. It also adds a separate measure of investment in the new industries. They are growing so fast, points out Endeavour Tian of Rhodium Group, that investment in fresh capacity can outpace current output. This investment has to be measured separately because the NBS table does not always attribute it to the three new industries. If someone builds a car or battery factory, Ms Tian notes, it is typically counted as demand for construction or machinery, not cars or batteries. All told, Rhodium Group estimates that the new three accounted for only 3.8% of GDP in 2023. Adding the construction of new electricity infrastructure and some proxies for robotics, software and artificial- intelligence investment brings the total to 5.5% in 2023 and 6.3% in 2025. A different attempt to measure China’s new economy was published last year by Goldman Sachs. The bank looked beyond the new three to high-tech manufacturing overall, including electronics, ship-, plane- and trainmaking, medical products and other equipment, instruments and meters. This broader set amounts to about 8% of GDP—still smaller than property. It is also less labour-intensive. The bank once calculated that 1trn yuan spent on NEVs creates 2.8m jobs, whereas the the same sum spent on residential construction generates 3.7m. The speed of a sector’s growth matters, too. If a small industry grows twice as fast as another that is twice as big, it can make the same contribution to growth. Although high-tech manufacturing is smaller than property, it is growing fast even as property shrinks. By next year it will add more to growth than property subtracts, according to Goldman Sachs, even counting the fiscal spillovers from property’s decline and the drag on consumption when people do not buy new homes to furnish. If high-tech manufacturing merely offsets property’s drag on growth, it will stop GDP shrinking but it will not be enough to increase it by Mr Xi’s goal of 4.5-5% a year. He has been urging entrepreneurs and local governments to think more imaginatively about new productive forces, including in old industries.

The application of new ideas in existing businesses is part of the NBS’s own definition of the “new three”—not EVs, batteries and solar panels, but “new industries, new formats and new business models”. This can span everything from drip irrigation to fire alarms. NBS calculations find these industries, formats and models already account for 18% of GDP, exceeding property’s share. “In a broad sense, the new economy now fully counterbalances property’s drag,” concludes Citigroup, another bank. If new productive forces are to meet China’s official growth goals, they must be felt beyond the industries that hog the headlines. In economics, size is not all that matters. Scope counts for something, too.■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/11/how-big-are-chinas- emerging-industries

Finance & economics | Investing by numbers Stears wants to be Africa’s Bloomberg terminal As the continent’s markets mature, high-quality financial analysis is more essential than ever June 11th 2026 IN AMERICA OR Europe, mapping out a public company’s ownership structure takes a few clicks on a Bloomberg terminal. In Nigeria, you might need to rely on a website that coughs up ten-year-old data. Seven hours at an office in Abuja, the capital, could yield a dusty but more up-to-date document, as might a trip to the stock exchange if the company in question has ever been publicly listed. Few foreigners are willing to do the legwork, which helps explain why Africa gets around 5% of the world’s foreign direct investment and accounts for less than 1% of the market capitalisation of its listed companies. Stears, a nine-year-old Nigerian company, offers to go the extra mile. At the Nigerian