Beijing, China – The real estate sector in China has been a significant factor impacting economic growth since 2022. The decline in property has led to a decrease in fixed-asset investment, affecting consumer spending and causing a contraction in the credit system. As a result, the traditional reliance on real estate as a primary economic driver is unsustainable.
Looking ahead, the automobile industry has the potential to become a key growth driver in China, with its vast market size. However, it remains smaller than real estate and cannot wholly replace the housing sector. While China’s manufacturing industry is substantial, expanding it to replace housing would lead to trade conflicts with other countries.
Areas such as education and healthcare continue to face unmet demands in China. These are significant concerns for the Chinese population, with housing, education, and healthcare often dominating conversations. Progress has been made in housing over the past two decades, but barriers in education and healthcare prevent full spending potential. This presents substantial business opportunities and growth potential for the Chinese economy.
In 2023, the United States spent over 20% of its GDP on education and healthcare, a share significantly higher than China’s. By increasing the focus on services, China can tap into considerable growth potential. While some view education and healthcare as consumer spending, investing in these sectors can enhance labor productivity and human capital.
China’s current development model, based on tangible capital accumulation, will shift towards human capital and innovation. Sectors like education and healthcare not only contribute to domestic demand but also help reduce external imbalances. Increased government borrowing for public services and social security can offset the negative impacts of a credit contraction due to the real estate downturn.
The Chinese government is increasingly prioritizing science, education, and human capital for economic prosperity. By coordinating manufacturing and service industries effectively and leveraging the service sector as a new growth engine, China can continue to expand its economy substantially.