China's Economy Navigates Property Slump with Export Strength and Tech Growth

Property Market Continues to Face Headwinds

China's property sector has been grappling with a significant downturn, a crisis sparked by the 2021 default of Evergrande Group. The real estate sector's contribution to China's Gross Domestic Product (GDP) has seen a notable decline, falling from a peak of 24% in 2018 to approximately 19% in 2024. This slump is characterized by falling sales and developer defaults. New home sales reportedly dropped by 6% in 2023, with secondhand home prices also decreasing in major cities. Between 2020 and 2023, real estate firms faced an estimated $125 billion in bond defaults. Housing prices have seen a substantial reduction, falling 20% or more since their 2021 peak. Property investment also saw a 9% year-on-year decline in the first two months of 2024. The International Monetary Fund (IMF) has warned of a possible decline in China's property market. In response, the government has introduced measures such as reducing downpayment requirements, lowering mortgage rates, easing purchase restrictions, and encouraging local governments to acquire unsold properties for social housing. Despite these efforts, some analysts, including Goldman Sachs, anticipate that property prices may only stabilize by late 2025, contingent on significant government intervention.

Consumer Spending Remains Cautious

Consumer confidence in China remains subdued, largely influenced by concerns over high living costs, job security, and income disparities. A survey indicated that approximately 38% of consumers cited rising daily consumption costs as their primary concern. Retail sales growth has shown signs of moderation, with an increase of just 1.3% in November 2025 year-on-year, a slowdown from the 2.9% growth observed in October. Disposable household income growth has been below pre-pandemic levels, and the wealth effect from property ownership has 'virtually vanished'. However, there are also signs of resilience; consumer spending contributed a significant 83.2% to economic growth during the first three quarters of 2023. Total retail sales of consumer goods reached 47 trillion yuan ($6.5 trillion) in 2023, marking a 7.2% increase from the previous year. Chinese consumers are increasingly prioritizing services and experiences, with notable growth in sectors like education, travel, food and beverages, and health products. The 'guochao' trend, emphasizing homegrown brands incorporating Chinese cultural elements, is also gaining popularity.

Robust Export Performance

Despite domestic challenges, China's export sector has demonstrated considerable strength. In 2023, China maintained its position as the world's number one exporter, with total exports reaching $3.41 trillion, an increase of $709 billion since 2018. Key export categories in 2023 included Telephones ($331 billion), Computers ($177 billion), Integrated Circuits ($144 billion), Cars ($76.1 billion), and Electric Batteries ($75.7 billion). The first ten months of 2024 saw China's goods trade reach 36.02 trillion RMB (US$5.05 trillion), with exports growing by 6.7%. Overall exports grew 7.1% year-on-year to 25.45 trillion yuan in 2024. China recorded a substantial trade surplus of $820 billion in 2023. Notably, exports to Russia experienced a significant surge, increasing by nearly 50% in 2023.

Advancements in AI and High-Tech Industries

China is actively transitioning its economic model from manufacturing-centric to technology-driven, with a strong focus on high-tech industries and Artificial Intelligence (AI). President Xi Jinping has articulated a goal for China to achieve innovation leadership by 2035. The nation's R&D spending has reached 2.8 trillion yuan, ranking second globally. China aims to become a major AI innovation center by 2030, projecting its AI core industry to exceed 1 trillion yuan. Beijing alone hosts approximately 28% of the country's 2,200 AI enterprises. The AI ecosystem was valued at an estimated $14.7 billion in 2023, with an anticipated annual growth rate exceeding 25% until 2030. The broader high-tech industry was valued at over RMB 26.6 trillion (USD 3.88 trillion) in 2023, with projections to reach RMB 35 trillion (USD 5.11 trillion) by 2025. Major tech hubs include Beijing, Shenzhen, Shanghai, and Hangzhou. The government's 'AI Plus' initiative is designed to integrate AI across various sectors, with high-tech manufacturing profits growing by 10% year-on-year in the first eleven months of 2025. China is recognized as the world's largest high-technology exporter.

Conclusion

While China's economy faces ongoing challenges from a protracted property slump and cautious consumer sentiment, its robust export performance and strategic investments in high-tech sectors, particularly AI, are proving to be significant pillars of resilience. The government's focus on fostering innovation and technological self-reliance aims to counterbalance domestic economic pressures and drive sustained growth in the long term.