World Geostrategic Insights interview with Tianchen Xu on current China’s growth challenges and opportunities.
Tianchen Xu is a Senior Economist at the Economist Intelligence Unit (EIU), where he is part of the Asia team based in China. He specializes in macroeconomic analysis of China, with a focus on growth prospects, fiscal and monetary policies, the real estate market, and regional trade dynamics. He is also a certified Financial Risk Manager. Before joining the EIU, he worked at the United Nations headquarters in New York and for the e-commerce giant JD.com, in addition to holding positions at Bloomberg and the Financial Times.
Q1 – The EIU recently revised downward its forecast for China’s GDP growth in 2026, bringing it to 4.3%. Given that many international partners continue to hope for a target close to 5%, what are the main structural factors making it difficult to sustain higher growth rates in this new phase of China’s economic development?
A1 – Correction: our forecast is 4.6%. Given the size of China’s economy, high growth can’t last forever after a multi-decade economic miracle. Structurally, the main drag comes from the property sector.
Q2 – 2026 marks the start of China’s new plan for the country’s economic and social development. Which sectors, aside from technology and the green transition, do you believe will be the true drivers of the “high-quality growth” promoted by Beijing in its 15th Five-Year Plan?
A2 – Beyond the high-profile tech and green transitions, the 15th Five-Year Plan identifies the “Silver Economy,” modern services, and rural revitalization as the critical, under-the-radar engines of high-quality growth. With the silver economy projected to reach 30 trillion yuan by the mid-2030s, 2026 sees a massive pivot toward specialized healthcare, senior-oriented leisure, and elder-friendly infrastructure, transforming a demographic challenge into a consumption “blue ocean.” Simultaneously, Beijing is prioritizing modern services—specifically advanced logistics, pension finance, and professional consulting—to move the economy up the value chain, while rural revitalization focuses on closing the urban-rural divide through agricultural modernization and integrated rural tourism.
Q3 – While some analysts predict a 10–14% contraction in real estate sales in 2026, others anticipate structural stabilization. What is your view on the possible end of the real estate crisis and its lasting impact on household wealth?
A3 – Depending on what angles you look at. For housing prices, there are definitely encouraging signs of a stabilisation around the corner, since valuations have returned to more affordable levels. On the other hand, housing development is still falling, partly because of developers’ deleveraging and partly because of the government’s curb on new projects.
China is unique in that the housing downturn didn’t lead to a systemic financial crisis. Its banking sector is somewhat insulated, and has largely been intact. The implosion of shadow banking – where a lot of housing development credit comes from – is nonetheless a blow to the economy, and China is still absorbing the fallout. It’s a critical factor behind the current structural imbalance – insufficient demand relative to supply.
Q4 – You have often emphasized the need for consumption-driven growth. What specific reforms to the social safety net do you consider essential to convince Chinese households to spend more and save less in 2026?
A4 – The key to mobilise consumption is to re-design the social insurance plans for China’s more than 200 million migrant workers. Most don’t pay for social security when they work, and they are entitled to a pittance as post-retirement benefits. China should consider making social insurance mandatory for them and subsidise the scheme more.
Q5 – With a potential escalation of tariff tensions between the United States and China and an end to recent trade truces, how can Chinese companies reorganize their supply chains to mitigate potential risks of isolation from Western markets?
A5 – Many Chinese companies have opted to extend their supply chains beyond China, by setting up assembly plants in third places like ASEAN and Mexico. They still very much rely on China’s low-cost and highly-efficient domestic supply chains for intermediate components.
Q6 – You have noted that Southeast Asia is becoming a crucial hub for Chinese cross-border trade. Do you believe this “re-export” strategy can hold up in the long term?
A6 – I don’t think Southeast Asia’s current role can be characterised by a “re-export” or “transshipment” hub. It has evolved into a processing or assembly hub, shaped by Chinese direct investments. China made these investments not only to dodge US tariffs, but also to tap into local markets. These will help Southeast Asia move up the value chain over time.
Q7 – Beijing is firmly committed to self-sufficiency in semiconductors and artificial intelligence. To what extent are U.S. restrictions on advanced technology exports actually accelerating—or, conversely, hindering—China’s domestic innovation?
A7 – US restrictions are hindering China’s technology progress in the short term, but will accelerate it in the long run because they only spurred China to double down its investment in core technologies.
Q8 – To what extent is the widespread adoption of artificial intelligence in Chinese factories offsetting the decline in the workforce caused by an aging population?
A8 – Right now China has excess labour supply. But in the long run, a labour shortage is likely to emerge in 10-20 years. By then AI’s role in filling the labour gap will be important.
Q9 – Why do major high-tech multinationals continue to invest billions in China even though geopolitical risks are at an all-time high?
A9 – Is it true though? Multinationals have invested billions in chemicals and autos. China’s supply-chain advantages have outweighed geopolitical concerns.
Tianchen Xu – Senior Economist at the Economist Intelligence Unit (EIU),