When it comes to high-tech industries such as robotics, commercial aerospace, and artificial intelligence, public attention in China often focuses on technological progress and project implementation. Competition among localities is also mainly reflected in which projects are implemented faster, which industrial scale is larger, and which has more application scenarios. These issues belong to the realm of policy operations and reflect how high-tech policies are implemented, as well as the capacity and progress of different regions in executing them.

ANBOUND focuses more on strategic issues, namely the relationship between this round of high-tech industrial development and China's economic growth. Through the observations of ANBOUND’s founder Kung Chan, the growth model of China's economy has not fundamentally changed in this wave of high-tech industrial development. As it stands, the country still relies heavily on investment-driven growth, except that the investment targets have shifted to high technology, and its stimulating effect on the economy may even be less than before.

In the past, China's economy showed distinct investment-driven characteristics. The government expanded demand through infrastructure construction, real estate development, industrial investment, and urbanization. Meanwhile, enterprises promoted production by increasing factories, equipment, and production capacity. At the same time, the financial system converted residents' savings into investment funds for enterprises and local governments. Investment thus became the most direct and easily operated tool for policies to stabilize economic growth. According to World Bank data, after 2004, China's gross capital formation as a percentage of GDP remained at around 40% for a long time, and exceeded 46% around 2011, significantly higher than most major economies.

In the previous investment boom, real estate and infrastructure were the primary investment targets. Especially in the growth model led by local governments, a mutually reinforcing cycle was formed through land sales, real estate development, urban construction, bank credit, and local government financing vehicles. All these supported rapid economic development. Now that real estate investment has contracted sharply and the incremental space for traditional infrastructure is increasingly limited, high-tech-related major projects have begun to become new investment targets.

Data from China’s National Bureau of Statistics (NBS) show that from January to July 2026, national real estate development investment fell by 19.2% year-on-year, infrastructure investment dropped by 3.6%, and manufacturing investment declined by 1.7%. However, high-tech industry investment still grew by 5.0%, among which investment in the information services industry grew by 19.2%, aerospace vehicle and equipment manufacturing grew by 12.3%, and electronic and communication equipment manufacturing grew by 7.1%. It can be seen that against the backdrop of overall declining investment, high-tech investment has grown against the trend.

High-tech investment is further translated into projects, large and small, across the country. In Jiangsu Province, there have been 670 major provincial projects for 2026, including 414 industrial projects. Among major manufacturing projects, the proportion of strategic emerging industries and future industry projects increased from 74% to 80%. Sichuan Province scheduled 830 key provincial projects, including 425 industrial projects, with an annual planned investment of 363.75 billion yuan. Projects involving new quality productive forces such as AI, the low-altitude economy, and aerospace exceeded 240. Yunnan's first batch of provincial-level major projects reached 1,677, with a total investment of RMB 2.57 trillion, among which 929 were industrial projects. There are already 513 projects receiving capital support from central budget-within investments, special bonds, and policy-based financial tools. Major projects, too, provided a support rate of over 30% for the province's annual investment.

The problem is that although many high-tech industries have development prospects, moving from technological breakthroughs to scaled commercial application and profitability often requires a long period of time.

Take commercial aerospace as an example. The commercial space launch provider LandSpace's operating revenue in 2025 was only RMB 52.0963 million, while its net loss attributable to shareholders reached RMB 1.711 billion, with cumulative losses of about RMB 3.775 billion from 2023 to 2025. Even for SpaceX, the most successful company in the industry, it is not the rocket launch business that supports its revenue and cash flow, but the Starlink business, which already has stable subscription revenue. From this, it can be seen that for most commercial rocket companies in China, the path to profitability will inevitably be longer.

AI and the low-altitude economy similarly face the issue of investment running ahead of revenue. Foundational large models require long-term chip purchases, data center construction, and the bearing of high research and development and electricity costs. SenseTime, a large-model enterprise, achieved revenue of RMB 5.015 billion in 2025, of which generative AI revenue was RMB 3.63 billion, but it still recorded a net loss of RMB 1.782 billion for the full year.

The commercialization conditions for the manned low-altitude economy are even more complex, requiring the simultaneous resolution of issues such as airspace opening, airworthiness certification, safety regulation, takeoff and landing facilities, and passenger traffic scale. EHang is already an enterprise with relatively rapid commercialization of eVTOLs globally, but its 2025 revenue was about RMB 418 million; its net loss still stood at RMB 276 million, and cumulative losses reached RMB 2.262 billion. The aircraft it has delivered are currently mainly used for scenic area tourism, testing, training, exhibitions, and trial operations.

The country’s decision-making departments, of course, are aware of the issue of returns on high-tech investment. The guiding opinions on government investment funds issued by the General Office of the State Council in 2025 have explicitly required the prevention of homogenized competition, overcapacity, low-level redundant construction, the crowding out of social capital, and the addition of hidden local government debt. Since the document has explicitly mentioned the issues, local governments certainly do know the risks.

Why, then, do local governments still conduct it? A report by the Yicai Research Institute reveals that nearly all 291 publicly available prefectural-level and above 15th Five-Year Plan outline documents prioritize high-tech industries for local economic development. Among them, 257 cities want to develop the low-altitude economy, 198 cities intend to develop new energy, 146 cities plan to develop robotics, and 113 cities want to develop semiconductors.

The reason is straightforward. Investment remains necessary to drive economic growth. China's 2026 growth target of 4.5% to 5% requires striving for better practical results, making it essential to find drivers that can generate growth.

To achieve this aim, some would point out using consumption as a means. The Central Economic Work Conference in 2024 already listed "boosting consumption and expanding domestic demand" as the primary task among nine key tasks for 2025, but the implementation effect of the policy has remained limited. From January to July 2026, total retail sales of consumer goods grew by only 1.2%. Consumption is a slow-moving variable, jointly affected by residents' income, employment, real estate wealth, social security, and future expectations. Given the reality of China's economic development, relying on consumption to fill the growth gap left by the contraction of real estate in a short period of time is basically impossible.

When it comes to exports, they can certainly contribute to growth. In 2025, the contribution rate of net exports to China's economic growth reached 32.7%, and exports maintained relatively rapid growth in the first 7 months of 2026. However, exports rely on external markets and are affected by tariffs, geopolitics, and the international trade structure. They can become a growth driver, but they are not a policy tool that local governments can stably organize and actively control.

It seems the option left would be investment. Real estate can no longer be carried out as it was in the past, the marginal benefits of traditional infrastructure are getting lower and lower, and local debt constraints are getting stronger and stronger. In the end, all that remains is high-tech investment. High technology at least still has prospects, and at the same time involves issues of national security and technological self-reliance. It can enter national strategies and fit into local project lists. Additionally, it can set up funds and build industrial parks, and can also vie for special bonds, policy-based financial tools, and bank credit. As a practical policy choice, high technology naturally becomes the most suitable direction to continue investing in.

Therefore, resource organization methods of high-tech industries are gradually becoming "infrastructure-ized". After policies determine the direction, localities formulate projects, public capital goes in first, financial institutions provide leverage, enterprises follow up with investment, and industrial parks and production capacities are built up, all prior to looking for application scenarios and market demand. Before any returns are seen, the debt snowball rolls larger and larger. Local government finances are already not well-off now. The holes left by land finance have not yet been filled, and if massive amounts of capital are squeezed into high-tech projects with long payback periods through funds, state-owned enterprises, and credit, the debt problem will cause the issue to be even more dire.

This, of course, does not mean that the localities in China cannot develop high-tech fields, but rather that their development must pay attention to certain issues. Supporting high-tech investment with limits and bearing a portion of failures is a cost that technological competition must pay. However, if major high-tech projects are treated as substitutes for real estate and traditional infrastructure and are required to shoulder the same scale of steady-growth tasks, then the nature of the matter will change. Technology investment should originally be undertaken by long-term capital capable of bearing risks. Once it increasingly relies on local state-owned assets, financing platforms, and bank credit, the industrial risks of high technology will gradually transform into fiscal risks and financial risks.

Kung Chan believes that one does not need to be particularly pessimistic about whether China's economy can maintain a certain growth rate in the future. After all, China still has a complete manufacturing system, a huge market, and a large number of engineering and technical talents, and some high-tech industries will surely grow eventually. What is truly pessimistic is that during this growth process, if methods relying on large-scale investment, industrial park construction, and debt expansion from the past are still followed, then the new productive forces will not have fully grown yet, while the debts of the old model will have already reaccumulated. High-tech, of course, needs to be developed, and even must be developed, but developing high-tech and utilizing such projects to drive investment are two different things. Only an industry that grows by relying on real demand, long-term technological accumulation, and enterprise profitability can become a new economic pillar. An industry that mainly relies on policy signals, project lists, and capital leverage may not leave behind new quality productive forces in the end. Rather, it might see a new round of debt wrapped in technological garb.

Final analysis conclusion:

China's investment-driven model of the economy has not exited because of real estate contraction. Now, high technology is becoming a new vehicle for localities to organize projects, absorb capital, and sustain growth. This, indeed, is the "infrastructure-ization" of high-tech investment. The Chinese authorities will need to be vigilant against using short-term steady-growth methods to promote long-cycle, high-risk, high-tech industrial expansion. Once project scale and debt leverage get out of control, the ultimate weight added will still fall upon the fiscal, state-owned capital, and banking systems.

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Chen Li is an Economic Research Fellow at ANBOUND, an independent think tank.