Output from China’s hi-tech manufacturing sector grew at the slowest pace on record last year amid a faltering economy and ever-escalating containment efforts from the United States, with the decline weighing on Beijing’s march towards superpower status.
Industrial output from hi-tech manufacturers rose by 2.7 per cent year on year in 2023, falling behind an increase of 5 per cent from the overall manufacturing industry, marking the lowest level of growth since the National Bureau of Statistics started to release the figures in 2018.
The hi-tech manufacturing industry had seen its growth soar to a record high of 18.2 per cent in 2021 before easing to 7.4 per cent in 2022, having stood at 7.1 per cent in 2020 amid coronavirus-induced disruptions to the global supply chain.
Investment in hi-tech manufacturing grew by 9.9 per cent last year, beating the 6.5 per cent increase seen in the overall manufacturing industry, but the financing still registered the slowest pace since records began in 2015.
Peng Peng, executive chairman of the Guangdong Society of Reform, said the sector is heading into a cooling period after years of rapid expansion.
“The hi-tech recovery will require China to return to higher economic growth and counteract US decoupling.
“It also demands the country’s ability to adapt to deglobalisation, but maintain a strong global exporter role.”
Even if these tech manufacturers succeed in going public, the potential sanctions would affect their market valuations
It said China’s hi-tech manufacturing industry was currently facing challenges from insufficient innovation and increasing external pressure.
Chen Zhiwu, a chair professor of finance at the University of Hong Kong, said headwinds such as risks of a global recession and US-China tensions would continue to exert “extraordinary pressures” on China’s hi-tech push.
‘More, better’: premier urges China to focus on application of core technologies
‘More, better’: premier urges China to focus on application of core technologies
“The US tech war has largely thwarted Chinese tech companies’ [initial public offering] opportunities. Even if these tech manufacturers succeed in going public, the potential sanctions would affect their market valuations,” said Chen.
He added China’s weak economic momentum is also weighing on the market’s overall willingness to invest, with hi-tech manufacturing just one element.
“The rapid development of hi-tech industries over the past 20 years has provided China with a massive boost to its economic boom, this was partly due to the impact of a stable external environment on investor confidence,” Chen said.
“Many hi-tech companies I’ve surveyed recently said that market demand for tech products is relatively low, and with uncertain market sentiment, consumers are tightening their wallets so much that companies have to cut back on production.”
