How much can high tech offset the drag from real estate?

  • Goldman Sachs estimates that high-tech industries contributed an average of 1.9 percentage points a year to China's real GDP growth in 2016–2025. In its baseline scenario, the contribution will remain broadly stable at 2 percentage points a year in 2026–2030.
  • This assessment depends on high-tech industries continuing to outperform the overall economy: real export growth supports high-tech manufacturing, while demand for AI computing power and digitalization supports telecommunications, IT and software services. As real estate's share of the economy declines, Goldman Sachs expects the drag on growth from its continued downturn to gradually ease, with the combined contribution of the two sectors to growth improving.
  • High tech's expansion is already evident in production and investment: the share of related manufacturing in industrial output rose from 33% in 2021 to 38% in 2025; the combined share of high-tech manufacturing and services in fixed-asset investment rose from 13% to 18.4%.

Why does output growth provide a weaker boost to employment?

  • High-tech production is relatively capital-intensive. The share of total employment in related industries rose only from 10.4% in 2018 to 10.8% in 2023, a much smaller increase than the changes in their shares of production and investment.
  • Goldman Sachs estimates, accounting for each industry and its domestic supply chain, that every 1 million yuan in final spending on high-tech products and related services supports about 3 jobs; the same spending supports about 4.6 jobs in real estate and 4.4 in services overall, respectively.
  • Every 100 yuan in final high-tech spending generates about 73 yuan in domestic value added and 33 yuan in labor compensation; the respective figures are 90 yuan and 40 yuan for real estate, and 92 yuan and 46 yuan for services overall. High tech's greater reliance on imported inputs directs more spending to production abroad and also reduces the labor income retained domestically.

Which sources of demand does growth rely on more?

  • According to the 2023 input-output table, household and government consumption accounts for about one-fifth of final demand for high-tech products and services, investment purchases for nearly half, and exports for about one-third; consumption accounts for about seven-tenths of final demand for services overall.
  • High-tech manufacturing is particularly reliant on overseas demand, with exports accounting for nearly half of its final demand. The shift in economic activity from real estate to high tech means exports play a greater role in the growth outlook, and makes domestic investment and overseas demand important pillars for sustaining high-tech output growth.

How much additional growth can data centers and the ‘six networks’ deliver?

  • Goldman Sachs estimates cumulative investment in water, power, computing, communications, underground pipeline and logistics networks at 28.4 trillion yuan in 2026–2030, up 14% from 24.9 trillion yuan in 2021–2025. Within that total, investment in computing networks is expected to rise from 3.2 trillion yuan to 4 trillion yuan.
  • Goldman Sachs estimates that investment in the six networks could raise the average level of China's GDP in 2026–2030 by about 4%, with data center construction contributing about 0.4 percentage points; this is an effect on the level of GDP, not an annual increase in the GDP growth rate.
  • As more new data center capacity is used for AI inference, computing hardware such as servers and AI chips accounts for a larger share of investment. Goldman Sachs believes that if more chips are supplied by domestic vendors, particularly for government-funded data centers, import leakage will decline and investment will provide a stronger boost to domestic growth.