China aims to spend more than a billion dollars to bolster manufacturing and domestic tech in a bid to remain globally competitive, while divulging little new support for the struggling real estate market. Industrial support clearly ranked first on Beijing’s priority list for the year ahead, according to three major plans released this week as part of China’s annual parliamentary meetings.
One of those reports, from the Ministry of Finance, said the central government would allocate 10.4 billion yuan ($1.45 billion) “To rebuild industrial foundations and promote high-quality development of the manufacturing sector.” While that’s down from the 13.3 billion yuan earmarked for the same category last year, the sector overall gained greater prominence. In 2023, plans to spend on industrial development came second to support for consumption.
Chinese authorities in 2020 intensified a crackdown on real estate developers’ high reliance on debt for growth. Property sales have since plunged while developers have run out of money to finish many projects, cutting into what was once about 25% of China’s GDP when including related sectors such as construction.
UBS analysts late last year estimated property now accounts for about 22% of the economy. Despite widespread attention on whether Beijing would bail out the property sector, real estate got no mention in the finance ministry’s spending plans, and limited attention in a ministry-level press conference about the economy during the parliamentary meetings. Instead, the housing minister was included in the lineup for a press conference about people’s livelihoods.
Within that second priority, the finance ministry said it would allocate 31.3 billion yuan for improving vocational education. Amid high youth unemployment, especially for university graduates, electric car company BYD and battery maker CATL are among those working with vocational schools to train staff for their expanding workforce.
Tech and industrial development by contrast received more attention, especially given the new political catchphrase “new productive forces” and strong emphasis on China’s leadership in electric cars. China faces growing pressure from the U.S., which in the last two years has cut Chinese businesses off from the high-end semiconductors necessary for most advanced artificial intelligence training. While Chinese companies are working hard on developing their own high-end chips, analysts generally predict it will take at least a few years for China to catch up.
Pressure on tech comes as the world’s second-largest economy has slowed its pace of growth after double-digit increases in decades past. Beijing this week set a national growth target of around 5% for the year ahead, a goal many analysts called “ambitious” for the level of announced government stimulus. An increasing number of senior Chinese officials also come from an engineering background, particularly in aerospace.
