The author is is Chief Investment Officer Asia at Lombard Odier.
A mental framework upon which to hang the data and details.
From Lombard Odier, July 21:
Article first published in The Business Times on 11 July here
China’s economy is split between world-leading innovation and structural weakness, making selectivity more important than ever for investors.
It was the best of times; it was the worst of times.
Charles Dickens, writing of revolutionary France, could scarcely have imagined how neatly his words would one day describe the Middle Kingdom.
China today presents a striking duality: pockets of technological excellence and global leadership, alongside a broader landscape of economic stress, weak domestic demand, and slowing momentum.
For investors, the question is not whether this duality exists – manifestly it does – but whether this duality exists — manifestly it does — but whether it is possible to navigate both “Chinas” at once: capturing exposure to genuine opportunity while avoiding the structural traps that sit alongside.
In Lombard Odier’s view, sharply accelerating high-tech and clean-tech exports should continue to anchor China’s growth outlook in 2026 despite domestic fragilities
New vs. old
“New China” – dynamic sectors such as electric vehicles, renewables, high-tech manufacturing, and advanced digital industries – continues to show extraordinary strength and global ambition. In 2025, the country produced around 16 million electric vehicles (EVs), substantially outpacing Europe’s approximately 3.2 million and the United States’ one million units.Similar dominance is visible in solar and battery production, where China accounts for most of global output and exports. The “new three” industries continued to post robust export growth into 2026, with notable records set in the early months.
Industrial output rose 4.5 per cent year-on-year in May 2026, accelerating from April and underscoring manufacturing resilience, particularly in coastal innovation hubs like Shenzhen and Shanghai.
Equity markets reflect this divide. New energy, technology, and innovation-related sectors have posted gains of 25 per cent year to date, while the broader Shanghai Composite, which includes more old-economy exposure, has delivered only modest returns, up roughly 2 per cent year to date.
In Lombard Odier’s view, sharply accelerating high-tech and clean-tech exports should continue to anchor China’s growth outlook in 2026 despite domestic fragilities.
In contrast, “Old China” – think smokestack industries, property, and legacy sectors – faces ongoing pressure, especially in inland and rural regions where development lags the coastal mega-cities.
The property market remains the clearest expression of that weakness. This matters because property and related construction activity once accounted for 20 to 30 per cent of the economy....
....MUCH MORE