There is a clear disconnect growing in terms of information and perceptions on the state of China’s economy, and its positioning in terms of the tech and AI revolutions. This week’s news provides many examples of this.
The real estate market—the heart of China’s economy—seems to be going from bad to worse, with total sales and construction numbers continuing to fall, as well as the prices of second-hand apartments that actually do trade in the market. The prospect for 2026 looks no better, in spite of commitments from the Central Economic Planning Committee last week to stabilize the real estate market.
Bank lending is weakening, China’s factory output In November fell well below market expectations. And in what certainly looks to be a sign of desperation, there was an announcement that all childbirth fees are going to be dropped—providing free birth for any couples who decide to have a kid.
On the other hand, reported youth unemployment numbers improved somewhat and there were further signs that the System’s huge focus on AI development and semiconductors is beginning, finally, to pay off. Nvidia was granted the right by the Trumpist administration to sell some of their best chips to China, probably removing a significant obstacle to China’s AI development (in what universe does that make sense?). And there was an announcement of a significant breakthrough in terms of semiconductor speeds by universities in China, allegedly up to 100 times as fast as Nvidia chips.
The word on the street this week, from one person we spoke to, was that China is close to nailing the whole AI thing and is poised to announce a major breakthrough sometime next year, thereby positioning it to take over the world. Maybe, maybe not. Someone else told us that China stocks—which have done pretty well over the past year but are still nowhere in terms of their performance over the last two decades compared to the Dow Jones index—are set to see solid rises over the next two or three years. The Center, he said, had decided, and so therefore it will happen. Place your bets, or not, as you prefer.
The anecdotal atmospheric sense of China, as we have reported so many times, remains gloomy with many people apparently increasingly concerned about job losses and inability to pay off mortgages. There are for sure immense strains on the system here at the grassroots level at least.
Anyway, we might as well bask in the glory as much as be glum in the gloom. So, enjoy the sunshine and have a great weekend!