Over the last half century, China has seen exceptional levels of growth averaging 9% a year and the fastest rate of urbanisation ever seen. China has emerged as the world’s largest exporter and second-largest economy behind the US. This growth was spurred on by its Open Door Policy implemented in 1978 which allowed for greater levels of overseas investment as China industrialised its industries and established special economic zones in Beijing and Shanghai, allowing for better operating conditions for overseas businesses.
China as an Investment over the last 5 years
In recent times China has been investing heavily in research and development to innovate their products, which has led them to become a scientific and tech superpower. However, since COVID China’s growth has slowed substantially to around 5% due to weaker export demand, real estate sector crises and structural changes.
Countries have started divesting away from China and diversifying their supply chains. This has developed due to growing global uncertainty about Chinese suppliers due to geopolitical tensions such as trade disputes, national security policies in sectors such as infrastructure, defence, and energy, and rising production costs relating to environmental regulations and labour supply shortages from the aging population.
At its peak, China’s real estate sector contributed 25% of China’s GDP and 38% of government revenue, from the sale of public land. However, the sector faced a sharp downturn induced by the world’s most indebted property developer, Evergrande’s bankruptcy in December 2021 leading the government to establish the Three Red Lines debt policy, which limited property developer’s borrowing and aimed to reduce excessive debt and prevent financial risks. This policy worsened the sector’s willingness and ability to acquire land from the government which reduced government revenues. Although China’s government attempted to rescue the property market by lowering down-payments and mortgage rates which has shown early signs of market stabilisation, the real estate sector’s uncertainty outweighed these and thus contracted the nation’s growth.
Regarding China’s structural changes, China’s economy is shifting away from traditional growth drivers like real estate and infrastructure toward high-tech industries, services, and greener technologies. However, this transition has been uneven and slow to offset the declines in older sectors. This is because although China is making breakthroughs in innovative fields, it takes time and significant investment scale to establish economies of scale.
What’s the Outlook for Investors
The outlook for investing in China over the next few years presents a mixed but cautiously optimistic picture, shaped by trade tensions, government policy interventions and sunrise industries.
With the re-election of Donald Trump, there have been elevated tensions between the US and China. President Trump has imposed cumulative tariffs of up to 54% on Chinese goods, pressuring exports that accounted for roughly 25% of China’s GDP in 2024. In retaliation, China has imposed a 34% tariff on all U.S. imports, including coal and LNG, effective April 10, 2025. This escalating trade war is likely to harm consumers in both countries as inflation increasingly affects everyday purchases. The outlook of this impact depends on the leaders of the two nations who are set to meet in June 2025, and this will signify if greater protectionist policies will be established.
In response to the economic slowdown over the past five years, China has set a GDP growth target of 5% for 2025, despite escalating trade tensions with the U.S. and domestic challenges like weak consumer demand and a struggling real estate sector. To support this goal, China has announced a comprehensive stimulus package, including a fiscal deficit expansion to 4% of GDP, the highest since 2010, and the issuance of 1.3 trillion yuan in ultra-long-term treasury bonds. The package aims to boost consumption through subsidies and expanded social safety nets, stabilise the property market, and accelerate infrastructure investment. However, challenges persist, including deflationary risks, inefficient resource allocation, and ongoing trade pressures, which may limit the stimulus’s effectiveness in achieving sustainable growth.
The outlook for China’s tech and sunrise industries in 2025 is promising, driven by government support, innovation, and strategic investments in emerging sectors. The technology sector, particularly AI, is set to play a pivotal role in economic growth. Research house Russel Investments highlights AI advancements, including the transformative impact of models like DeepSeek AI and innovations from firms such as Alibaba and Bytedance, despite challenges posed by U.S. chip export restrictions. The government’s focus on domestic substitution in semiconductors and fostering self-reliance in critical technologies further strengthens the sector’s prospects. Sunrise industries such as renewable energy and electric vehicles (EVs) are also thriving. JPMorgan forecasts BYD’s EV sales to grow 30% in 2025, solidifying its position as a global leader like Toyota in the new EV market. Renewable energy continues to benefit from China’s leadership in solar panels and wind power capacity expansion, supported by policy incentives. However, there are still risks including geopolitical tensions and regulatory unpredictability, which could impact profitability and innovation in these growth sectors. Overall, China’s tech and sunrise industries are poised for sustained growth, bolstered by strategic government interventions and strong market demand.
Key Takeaways for Investors
Investing in China in 2025 like all investing has its ups and downs. On the one hand, China remains a major economic powerhouse with a strong track record of growth. The government is actively working to attract foreign investment with new policies aimed at making the business environment more welcoming. This includes expanding access to sectors like biotech, telecoms, and healthcare, which are seen as key areas for future growth. On the other hand, challenges like trade tensions with the U.S. and a struggling real estate sector are weighing on the economy. Despite these issues, sunrise industries such as renewable energy, electric vehicles, and AI are booming. These sectors are not only driving innovation but also creating jobs and attracting investment.
Kurtis Castorina Investment Strategy Analyst, Your Future Strategy –
Over the last half century, China has seen exceptional levels of growth averaging 9% a year and the fastest rate of urbanisation ever seen. China has emerged as the world’s largest exporter and second-largest economy behind the US. This growth was spurred on by its Open Door Policy implemented in 1978 which allowed for greater levels of overseas investment as China industrialised its industries and established special economic zones in Beijing and Shanghai, allowing for better operating conditions for overseas businesses.
China as an Investment over the last 5 years
In recent times China has been investing heavily in research and development to innovate their products, which has led them to become a scientific and tech superpower. However, since COVID China’s growth has slowed substantially to around 5% due to weaker export demand, real estate sector crises and structural changes.
Countries have started divesting away from China and diversifying their supply chains. This has developed due to growing global uncertainty about Chinese suppliers due to geopolitical tensions such as trade disputes, national security policies in sectors such as infrastructure, defence, and energy, and rising production costs relating to environmental regulations and labour supply shortages from the aging population.
At its peak, China’s real estate sector contributed 25% of China’s GDP and 38% of government revenue, from the sale of public land. However, the sector faced a sharp downturn induced by the world’s most indebted property developer, Evergrande’s bankruptcy in December 2021 leading the government to establish the Three Red Lines debt policy, which limited property developer’s borrowing and aimed to reduce excessive debt and prevent financial risks. This policy worsened the sector’s willingness and ability to acquire land from the government which reduced government revenues. Although China’s government attempted to rescue the property market by lowering down-payments and mortgage rates which has shown early signs of market stabilisation, the real estate sector’s uncertainty outweighed these and thus contracted the nation’s growth.
China: Navigating a Real Estate Rescue and Renewed Trade Tensions | J.P. Morgan
China’s Real Estate Challenge
Regarding China’s structural changes, China’s economy is shifting away from traditional growth drivers like real estate and infrastructure toward high-tech industries, services, and greener technologies. However, this transition has been uneven and slow to offset the declines in older sectors. This is because although China is making breakthroughs in innovative fields, it takes time and significant investment scale to establish economies of scale.
What’s the Outlook for Investors
The outlook for investing in China over the next few years presents a mixed but cautiously optimistic picture, shaped by trade tensions, government policy interventions and sunrise industries.
With the re-election of Donald Trump, there have been elevated tensions between the US and China. President Trump has imposed cumulative tariffs of up to 54% on Chinese goods, pressuring exports that accounted for roughly 25% of China’s GDP in 2024. In retaliation, China has imposed a 34% tariff on all U.S. imports, including coal and LNG, effective April 10, 2025. This escalating trade war is likely to harm consumers in both countries as inflation increasingly affects everyday purchases. The outlook of this impact depends on the leaders of the two nations who are set to meet in June 2025, and this will signify if greater protectionist policies will be established.
In response to the economic slowdown over the past five years, China has set a GDP growth target of 5% for 2025, despite escalating trade tensions with the U.S. and domestic challenges like weak consumer demand and a struggling real estate sector. To support this goal, China has announced a comprehensive stimulus package, including a fiscal deficit expansion to 4% of GDP, the highest since 2010, and the issuance of 1.3 trillion yuan in ultra-long-term treasury bonds. The package aims to boost consumption through subsidies and expanded social safety nets, stabilise the property market, and accelerate infrastructure investment. However, challenges persist, including deflationary risks, inefficient resource allocation, and ongoing trade pressures, which may limit the stimulus’s effectiveness in achieving sustainable growth.
The outlook for China’s tech and sunrise industries in 2025 is promising, driven by government support, innovation, and strategic investments in emerging sectors. The technology sector, particularly AI, is set to play a pivotal role in economic growth. Research house Russel Investments highlights AI advancements, including the transformative impact of models like DeepSeek AI and innovations from firms such as Alibaba and Bytedance, despite challenges posed by U.S. chip export restrictions. The government’s focus on domestic substitution in semiconductors and fostering self-reliance in critical technologies further strengthens the sector’s prospects. Sunrise industries such as renewable energy and electric vehicles (EVs) are also thriving. JPMorgan forecasts BYD’s EV sales to grow 30% in 2025, solidifying its position as a global leader like Toyota in the new EV market. Renewable energy continues to benefit from China’s leadership in solar panels and wind power capacity expansion, supported by policy incentives. However, there are still risks including geopolitical tensions and regulatory unpredictability, which could impact profitability and innovation in these growth sectors. Overall, China’s tech and sunrise industries are poised for sustained growth, bolstered by strategic government interventions and strong market demand.
Key Takeaways for Investors
Investing in China in 2025 like all investing has its ups and downs. On the one hand, China remains a major economic powerhouse with a strong track record of growth. The government is actively working to attract foreign investment with new policies aimed at making the business environment more welcoming. This includes expanding access to sectors like biotech, telecoms, and healthcare, which are seen as key areas for future growth. On the other hand, challenges like trade tensions with the U.S. and a struggling real estate sector are weighing on the economy. Despite these issues, sunrise industries such as renewable energy, electric vehicles, and AI are booming. These sectors are not only driving innovation but also creating jobs and attracting investment.
Kurtis Castorina
Investment Strategy Analyst, Your Future Strategy
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References
AI Innovations And Trade Tariffs: The Outlook For China In 2025 | Russell Investments
JPMorgan raises 2026 sales forecast for BYD to 6.5 million from 6 million units – CnEVPost
China and emerging markets outlook 2025: Crisis or hope? | J.P. Morgan Asset Management | J.P. Morgan Asset Management
China: Analyzing the 2025 fiscal plan amid rising AI and tariffs | J.P. Morgan Asset Management