By Ashok Nilakantan Ayers
NEW YORK: China is steering its future in an uneven manner and with great speed. In gleaming industrial zones, robots guided by artificial intelligence assemble electric vehicles that rival the best in the world. Data centres hum with vast computing power. Laboratories race to design advanced chips, humanoid robots, cancer therapies and military technologies once dominated by the West.
Yet just beyond these islands of technological ambition lies an economy under mounting strain. Empty apartment towers loom over cities where young graduates struggle to find work. Local governments, weighed down by debt, delay wages to teachers and sanitation workers. Consumers save rather than spend, unsure of what lies ahead. These two realities — technological ascent and economic distress — are not separate stories. They are deeply intertwined.
China’s leadership, under President Xi Jinping, has embarked on one of the most aggressive state-led technology campaigns in modern history. The goal is nothing less than dominance across critical sectors: information technology, artificial intelligence, robotics, telecommunications, biotechnology, clean energy and military science. The strategy is designed to insulate China from foreign pressure, especially as relations with the United States remain tense and access to Western technology grows more restricted. But the costs of this push are mounting — economically, socially and politically.
Beijing has earmarked strategic industries for massive state support, channelling hundreds of billions of dollars into electric vehicles, advanced manufacturing, semiconductors, aerospace and artificial intelligence. Research and development spending jumped nearly 50 percent between 2020 and 2024, one of the fastest increases by any major economy.
The results are visible. China now installs more industrial robots than any other country. Its navy recently launched its most advanced aircraft carrier, equipped with an electromagnetic launch system that narrows the gap with U.S. capabilities. Its space program aims to land astronauts on the moon by 2030, potentially making China the sole operator of a permanent space station when the International Space Station is retired.
In artificial intelligence, the emergence of startups such as DeepSeek underscored China’s ability to compete at the cutting edge, even as U.S. export controls restrict access to advanced semiconductors.“Scientific and technological self-reliance is the foundation of national security,” wrote Guo Yuewen, a Communist Party-affiliated academic, in a recent state media commentary. The message from Beijing is clear: technological supremacy is not optional.
Yet China’s technology drive relies on a system that economists say is riddled with inefficiencies. Local governments, eager to align with Beijing’s priorities, pour money into favoured sectors regardless of market demand. Weak firms are kept alive through subsidies, cheap loans and state investment funds.
The electric vehicle industry illustrates the problem. As of last year, 129 brands were selling EVs or plug-in hybrids in China. Only 15 are expected to be financially viable by the end of the decade, according to Alix Partners. In robotics, officials warn of a similar glut, with more than 150 humanoid robot companies now competing for funding.
In Hefei, a manufacturing hub west of Shanghai, EV maker NIO received roughly $1 billion from state-linked investors starting in 2020. Over the next four years, it lost more than $10 billion. While its performance improved somewhat in 2025, it still posted significant losses, requiring further injections of public money.
Such investments prop up national champions but often fail to create broad-based employment. China’s largest chipmaker, SMIC, employs about 20,000 people. A leading humanoid robotics firm employs just over 2,000. Meanwhile, one in six young urban Chinese is unemployed.“There is massive misallocation across the economy,” said Loren Brandt, an economist at the University of Toronto. “Capital keeps flowing into sectors that don’t generate enough jobs or household income.”
The broader economy is faltering. Home prices are down roughly 17 percent since the pandemic. Local government debt — including off-balance-sheet borrowing — is estimated to have doubled since 2019, reaching as much as $23 trillion.
Productivity growth is slowing at a moment when China’s population is shrinking, a dangerous combination for long-term prosperity. The International Monetary Fund estimates that state aid to businesses — through subsidies, tax breaks and cheap credit — reduced China’s GDP by as much as 2 percent in 2023 by crowding out more productive investment.
At the same time, consumer spending remains weak. Urban disposable income averages less than $700 a month. In rural areas, hundreds of millions survive on only a few dollars a day. A thin social safety net encourages saving over spending, reinforcing deflationary pressures.
In Mianchi County, in central Henan province, spending on science and technology rose nearly 50 percent between 2022 and 2024, even as government revenue fell. Plans for a robotics industrial park moved forward. But teachers, sanitation workers and interns have publicly complained of unpaid wages. Officials acknowledged the hardship in a message posted online: “The county has encountered unprecedented difficulties.” Payments, they said, would come — eventually.
Instead of pivoting toward consumption, Beijing has doubled down on exports. China’s trade surplus in goods topped $1 trillion for the first time this year, underscoring the resilience of its manufacturing base despite U.S. tariffs and geopolitical tensions.
Restrictions imposed by Washington on advanced chip exports have reinforced Beijing’s resolve. Even President Trump’s recent move to allow limited Nvidia chip exports is unlikely to change China’s course. Officials have already urged companies to avoid certain foreign chips on cybersecurity grounds.
This emphasis on self-reliance has historical roots. Mao Zedong championed technological independence during the Cold War, with disastrous results during the Great Leap Forward. Today’s China is far richer and more capable, but the underlying tension remains: how to balance national ambition with economic sustainability.
IMF Managing Director Kristalina Georgieva recently urged China to shift away from debt-fuelled investment toward consumer-driven growth. “It’s patriotic to spend money,” she told Chinese journalists, urging stronger social protections and market reforms. Such changes would require Beijing to scale back its heavy hand — allowing failing firms to collapse, reallocating capital and strengthening welfare systems. So far, there is little sign of such a pivot.
For now, China is betting that technological dominance will offset its economic fragilities. The bet may reshape global power balances. But at home, the costs are already visible — in unpaid wages, idle factories, anxious consumers and a generation waiting for opportunity. The question facing China is not whether it can build the future. It is whether it can afford the way it is trying to do so. (IPA Service)
