High-end manufacturing & tech innovation spur China's economic growth

Editor's note: Chen Jiahe is the chief investment officer at Novem Arcae Technologies. The article reflects the author's opinions and not necessarily the views of CGTN. 

Recently, important indicators of China's economy, the purchasing manager indices (PMI), were released. 

Data shows that the economy is still fighting toward a full-scale recovery from its three-year-long battle against the COVID-19 pandemic.

Currently, there are two sets of PMI data in China: the official PMI and the Caixin PMI. 

The official PMI is calculated and published by the National Bureau of Statistics, while the Caixin PMI is published by Caixin, a private financial media company.

The data of these two PMIs is usually in line with each other, while the Caixin PMI is believed to be more focused on small and medium-sized enterprises (SMEs) as well as private sectors.

This October, both the official PMI and the Caixin PMI posted the same reading, which was 49.5. 

The official PMI was 0.7 point lower than the previous reading in September, while the Caixin PMI was 1.1 points lower.

Although the figures are below the threshold of 50 which separates expansion from contraction, the data of 49.5 is only 0.5 point short. 

Official data shows that since the beginning of 2023, China's PMI reading has been fluctuating around the threshold. The country's economy has been constantly working toward a full-scale recovery. 

Since the beginning of economic reforms in 1978, China's economy has experienced rapid growth for over four decades. The pillars of this remarkable expansion in recent years have been centered around infrastructure investment, exports and real estate. 

However, as these sectors have already reached significant levels of development, the future trajectory of Chinese economic growth will witness a shift towards new drivers such as high-end manufacturing, technological innovation and consumption.

In terms of high-end manufacturing and technological innovation, there are some similarities between these two economic forces. 

Firstly, both of them can create more value for the economy. Secondly, none of them is heavily relying on raw materials and working labor. Thirdly, both forces have the potential to sustain economic growth in the long run, and they are both environmentally friendly.

Meanwhile, the two drivers, high-end manufacturing and technological innovation, can provide strong support to each other. 

For example, the artificial intelligence (AI) provided by technological breakthroughs can increase the autonomous level of high-end manufacturing factories, while the hardware produced by high-end manufacturing industries can build a solid foundation for the development of technological innovation.

China's central government has recognized the significance of fostering advanced manufacturing and promoting technological innovation, with a substantial allocation of policy guidance and support being directed towards these two domains.

The recent policy aims to mitigate the barriers encountered by global investors when entering China's high-end manufacturing industries. 

This policy is anticipated to enhance the market efficiency of high-end manufacturing sectors, including new energy equipment, new energy vehicles and aircraft construction.

Increased global cooperation and market competition will help improve efficiency and quality.

Regarding the development of China's high-end manufacturing and technological innovation, the new energy vehicle (NEV) segment is a very good example.

Over a decade ago, China saw the potential of NEV as a new and large industry. Compared with the traditional vehicle, the NEV is more energy-saving, more environmentally friendly, and its electrical internal structure is more fitting for AI technology.

Furthermore, the industry can create hundreds and millions of employment opportunities for society, which is urgently needed for a country with 1.4 billion people.

Therefore, China started building its own NEV industry over a decade ago. Today, China's NEV industry has become a perfect example of high-end manufacturing and technological innovation. 

China's NEVs not only win in the domestic market, but have also obtained many orders from overseas markets, such as Europe, Southeast Asia, and so on.

During the growth of the NEV industry, China's capital markets have also played very important roles. 

It allows companies like BYD and Contemporary Amperex Technology (CATL) to raise money from the stock market. 

The success of these companies has been tied to the capital markets, and their stock investors have reaped substantial rewards. 

Notably, renowned American investors Warren Buffett and Charlie Munger have achieved significant returns by maintaining holdings in BYD shares throughout these years.

As high-end manufacturing continues to grow, looking ahead, with the help of high-end manufacturing and technological innovation, China's economic growth potential will be released in the coming decades, which will bring economic returns to investors.