China’s AI and robotics push isn’t enough to kickstart its economy, leaving growth more exposed to trade risks
China's aggressive investment in high-tech industries is insufficient to counterbalance a severe and prolonged downturn in its property sector, leaving the economy overly reliant on exports and vulnerable to escalating trade tensions, according to a new report from U.S. research firm Rhodium Group.
The analysis, released Monday, quantifies a stark economic divergence. From 2023 to 2025, emerging sectors like artificial intelligence, robotics, and electric vehicles contributed a mere 0.8 percentage points to China's overall economic output. In contrast, real estate and other traditional industries dragged down growth by a combined 6 percentage points.
These findings cast doubt on Beijing's growth strategy as it pursues technological self-reliance under a new five-year development plan, set to be fully implemented in March. The plan prioritizes state-led investment in advanced technologies to counter U.S. restrictions.
"China’s growth strategy isn’t going to work," said Logan Wright, a Rhodium partner and co-author of the report. "They’re not going to achieve their targeted rates of GDP growth based on the policies they have outlined so far."
To sustain its recent annual GDP target of around 5%, Rhodium estimates China's new industries would need to expand sevenfold over the next five years, requiring an additional 2.8 trillion yuan in investment this year alone—a 120% increase from 2025 levels. The report suggests such a pace is unsustainable, noting that electric vehicle growth has likely peaked.
Property Sector Drag Intensifies
While championing "new productive forces," Beijing has been hesitant to deploy large-scale stimulus for the ailing property market, which once constituted over a quarter of the economy. New home sales by floor area in 2025 plummeted to levels not seen since 2009.
The drag is significant. A separate macro outlook from global investment firm KKR estimates property weakness will subtract 1.2 percentage points from China's GDP growth in 2026. Even with a projected 2.6-point contribution from digital technologies, KKR's total growth estimate remains a modest 4.6%, below Beijing's likely target.
"Despite a potential 5% growth target for 2026, headwinds from real estate and a weak job market cast doubt on achievability," KKR's report stated.
Structural Challenges: Jobs, Exports, and Trade Tensions
The report warns that an overemphasis on capital-intensive tech sectors could exacerbate structural imbalances. While these industries offer higher wages, they generate far fewer jobs than the traditional manufacturing and property sectors they are meant to supplant.
KKR estimates that increased factory automation and China's already dominant share of global manufacturing could lead to the loss of up to 100 million jobs over the next decade—a displacement exceeding the total workforce of most developed economies. This comes amid persistent urban unemployment and youth joblessness rates approximately three times higher.
With domestic demand insufficient, Rhodium concludes that "Beijing will become even more dependent upon gaining market share in export markets," making the economy highly vulnerable to new trade restrictions. This trend is already visible, as the European Union, Mexico, and the United States have raised tariffs on imports of Chinese goods, including electric vehicles.
Chinese officials maintain a long-term perspective. Zhang Jianping, a deputy director at the Commerce Ministry, recently stated that the country's policies are designed to support multi-year innovation and that traditional industries must integrate new technologies to survive.
The report underscores a critical challenge for policymakers: navigating a managed decline in the old economic pillars while attempting to cultivate new ones at an unprecedented speed, all within an increasingly hostile global trade environment.
