China: High-Tech Sector Cushions Broader Slowdown – ING

China's July industrial output growth slowed more than market expectations, but the resilience of the high-tech sector provided an important cushion for the broader economic downturn. Lynn Song, analyst at ING, noted that despite pressure on the industrial sector, industrial production still showed relative resilience compared with other domestic indicators such as retail sales.

**High-tech sector becomes a structural highlight**

Against the backdrop of the broader economic slowdown, advanced manufacturing and the technology sector are becoming core pillars of China's growth strategy. According to ING's forecast, China's economic growth rate in 2026 is around 4.6%, with growth momentum concentrated on supporting domestic demand, advanced manufacturing, and technology. This structural transition trend is consistent with the analysis of Wang Yi, a professor at Virginia Tech, that as China's demographics change, manufacturing is gradually moving up the value chain. The continued AI investment boom has also brought sustained attention and capital inflows to related technology sectors.

**External pressures and self-reliance progress in parallel**

Although the high-tech sector acts as a cushion domestically, the external environment remains complex. In geopolitical rivalry, the semiconductor field continues to be a focal point. Reports indicate that the Netherlands' recent action against Chinese-owned Nexperia was intended to maintain control over the local supply chain. Meanwhile, Chinese companies such as Huawei are accelerating technological self-reliance. Facing restrictions on access to advanced chips and extreme ultraviolet lithography equipment, Huawei is attempting to bypass process node limitations through multi-layer chip stacking and system-level cluster advantages, as exemplified by its latest CloudMatrix 384 platform. However, market sources indicate that Chinese AI chips still lag industry leaders by at least two generations, and production capacity is constrained by insufficient supply from domestic foundries, so challenges remain severe.