On the bustling streets of Beijing, a small technology startup recently celebrated its IPO—another small step in China’s relentless pursuit of technological progress and independence. This is a good example of China’s long and increasingly confident economic journey, as outlined during the fourth plenum detailing the country’s strategic goals and challenges for the years ahead.
China’s coming 15th Five-Year Plan will set out another ambitious roadmap for the Middle Kingdom, aiming to transform it into a developed country with “middle” income levels by 2035. Despite numerous challenges, China appears firmly committed to modernizing its economy and becoming more self-reliant, especially in technology. According to Beijing’s recent guidance, the plan is set to emphasize the development of a modern industrial system, expanding domestic demand, and creating a unified internal market. These initiatives are intended to strengthen China’s economic resilience, enable sustainable growth, and cement its technological leadership, including in the digital sector. In fact, the plan will likely also provide useful insights on how countries can successfully navigate US isolationism.
Progress is also evident in the domestic economy: While the marks of numerous challenges are clear, so too is the remarkable adaptability of Chinese companies. In the third quarter, the economy grew by 4.8%, driven by industrial production and exports. While exports to the US remain below pre–“Liberation Day” levels, China’s global export growth has been surprisingly strong. The latest figures show an acceleration to 8.3% year on year. This resilience is further supported by targeted fiscal stimulus to stabilize domestic demand.
However, China’s path is not without hurdles: Challenges such as continued pressure on real estate prices, structural overcapacity, the indebtedness of various local governments, and US export restrictions and tariffs weigh on China’s manufacturing sector and domestic consumption, dampen business and consumer sentiment, and affect investment. Many of these challenges are structural in nature and will likely continue to affect markets going forward. While the modernization of China’s economy is set to continue, the structural decline of its once explosive growth is probably one of the inevitable consequences of this process.
The recent summit with the US government can also be considered a success, even though there was no complete rollback of tariffs and trade barriers. However, the strategic positioning and sometimes emotional political debates before the meeting underscore how fragile the balance between the two countries is. Given the strategic competition between the two superpowers, tensions are likely to remain a theme for markets in the future.
In summary, China’s systematic efforts are bearing fruit. The country is on track to drive growth, claim global leadership, and strengthen the independence of its economy. China has become a global leader in numerous industries, and there is little to suggest it will not achieve a similar position in technology in the foreseeable future. While domestic challenges and external risks will likely persist, the focus on technological progress and economic modernization—combined with systematic efforts to reduce supply chain dependencies and overcapacity—provides a strong argument for investors to consider a selective allocation to Chinese equities. The growth potential in the technology sector, in particular, suggests that internationally diversified investors should also consider Chinese technology stocks.
