China’s Boom: Why This Time Is Different
- Sep 16, 2023
- 8 min read
Updated: Mar 13
China’s post-COVID economic recovery is structurally different from previous boom cycles. Unlike earlier expansions driven primarily by infrastructure spending and commodity-intensive industrialization, this rebound is being shaped by consumer pent-up demand, technology self-sufficiency in semiconductors and EVs, and a deliberate policy pivot toward domestic consumption. For Canadian investors with emerging market exposure, understanding these differences matters: the traditional playbook of buying commodities and waiting for the Canadian dollar to surge may not capture where the real growth is headed this time.
In September 2023, Northland’s Co-CIO Joseph Abramson sat down with Yan Wang, Chief Emerging Markets and China Strategist at Alpine Macro, to examine what was driving the recovery, which sectors stood to benefit most, and whether the geopolitical risks were as dangerous as headlines suggested. Their conversation covered the full landscape: from the mechanics of the cyclical rebound to the structural forces reshaping China’s economy for the next decade.
What Is Driving China’s Post-COVID Recovery?
Wang framed the recovery in two phases. The first was mechanical: three years of zero-COVID policy had suppressed consumer activity so severely that removing the restrictions alone generated a sharp snapback. Households and corporations had accumulated enormous cash reserves during the lockdown period. Once restrictions lifted, that stored demand began to flow back into the economy.
The second phase, Wang argued, was policy-driven. After the Party Congress in late 2022 and the People’s Congress in early 2023, Beijing’s top priority became protecting growth. Interest rate cuts, infrastructure spending, and relaxed property market restrictions all pointed toward a government willing to use every available lever. Wang noted that China’s official growth target of 5% was likely a floor, not a ceiling, given that Beijing needed the economy to grow closer to 6% just to generate the 12 million jobs required to absorb new labour force entrants and address youth unemployment that had approached record levels.
Why the Winners Are Different This Time
In previous Chinese expansion cycles, the biggest beneficiaries were commodity producers and the countries that supplied raw materials for infrastructure buildout. This time, Wang expected the consumer and services sectors to outperform. The logic was straightforward: the production and export side of the economy had remained relatively resilient through COVID, while consumers were locked in their homes. The sectors that contracted most sharply during the downturn would bounce back most aggressively.
Restaurants, travel, and consumer services were the immediate winners. Commodities would still benefit from a broader cyclical upturn, Wang said, supported by three pillars: Chinese demand growth, a weakening US dollar, and supply-side constraints, particularly in crude oil. But the outsized gains were more likely in consumer-facing sectors than in the traditional commodity supercycle trade.
For Canadian investors, this distinction matters. A portfolio positioned for the 2003–2007 China boom, heavy on resource stocks and the Canadian dollar, might capture some of the upside but would miss the sectors with the strongest tailwinds.
The Structural Shift: EVs, Semiconductors, and Technology Self-Sufficiency
The most consequential change in the Chinese economy is not cyclical but structural. China has moved rapidly up the manufacturing value chain, from consumer electronics and white goods into electric vehicles, battery technology, solar panels, wind turbines, and advanced materials. When the podcast was recorded in September 2023, China had just overtaken Japan as the world’s second-largest car exporter. Wang pointed to the explosive growth of the domestic EV industry as evidence of a fundamentally different growth model from previous cycles.
Beijing’s strategic priorities, crystallized at the 2022 Party Congress, centre on self-sufficiency in key technologies. China’s trade deficit in semiconductors exceeds its deficit in crude oil, making chips the “new energy” of the current industrialization wave. The push extends beyond chips into AI, biotech, space technology, and new materials.
Wang made a nuanced point about the Chinese tech sector that Western media often misses. While the crackdown on consumer internet companies like Alibaba and Tencent dominated headlines, other technology sectors were booming. BYD, CATL, and dozens of semiconductor firms were growing explosively, supported by government policy. The “tech crackdown” narrative applied to a specific slice of the sector, not to Chinese technology broadly.
Abramson added that the sheer number of low-cost, well-trained engineers in China creates its own momentum. Drawing a parallel to the US defense drawdown of the late 1980s and 1990s, when engineers leaving the military sector helped build the internet economy, he suggested that China’s engineering talent pool could produce similar innovation spillovers.
Will Beijing Stay the Course or Relapse into Regulation?
Abramson raised a question that many investors were asking: once the economy stabilized, would Beijing revert to the heavy-handed regulation and wealth redistribution campaigns that had spooked markets in 2021 and 2022?
Wang’s view was measured. In the near term (two to three quarters from the conversation), the policy direction was clear: growth at almost any cost. The labour market was too weak and deflationary pressure too strong for Beijing to risk a policy reversal. Beyond that, Wang argued that the regulatory campaigns of previous years weren’t irrational. China had reached a middle-income level where environmental degradation and income inequality were generating genuine social pressure. The environmental cleanup and attempts to reduce the Gini coefficient were responses to real problems.
The question was whether Beijing could manage the trade-off between equality and efficiency. Wang framed it as a balancing act rather than a binary choice, acknowledging that the Wild West growth model that had served China during its catch-up phase was no longer sustainable or socially acceptable.
The Bull Case for Emerging Market Stocks and Bonds
By September 2023, Chinese financial assets had already rebounded roughly 50% from their October 2022 lows, yet valuations remained compressed. Wang described this as the “sweet spot” for equity investors: multiples still low, earnings beginning to improve, and policy still accommodative. This is the most bullish phase of any market cycle, and Wang saw no reason to turn negative until the conditions changed, meaning until valuations became elevated, earnings growth matured, or policymakers began tightening.
On fixed income, Wang was particularly constructive on emerging market local currency bonds. His thesis rested on two pillars. First, EM central banks had tightened more aggressively than the Federal Reserve, pushing real policy rates well above inflation in countries like Brazil, Mexico, and South Africa. As inflation rolled over, these central banks had room to cut rates, driving bond prices higher. Second, Wang expected the US dollar to have peaked on a long-term basis, which would provide a currency tailwind for local-currency EM debt.
For investors who wanted EM exposure without direct China political risk, Wang noted that EM ex-China was a viable option. The historical correlation between China and the broader EM complex is high, and the turning points tend to coincide. Investors would give up some upside, particularly in China’s unique technology sectors, but would capture most of the cyclical trade.
Is a US-China Military Conflict Over Taiwan Inevitable?
The conversation turned to the elephant in the room: geopolitical risk. US-China relations had deteriorated sharply, with public opinion in both countries reaching historic lows of favourability toward the other. China’s then-new foreign minister had warned that without a change in US policy, conflict and confrontation were inevitable.
Wang offered a more measured assessment. He argued that both the US and China are fundamentally rational actors with enormous economic incentives to avoid military confrontation. On Taiwan specifically, he made three points. First, Taiwan sits close to China’s most economically vital coastal provinces, meaning a conflict would devastate China’s own economic heartland. Second, unlike Russia’s objectives in Ukraine (to neutralize a perceived security threat), Beijing’s goal is to maintain Taiwan as a prosperous part of Greater China, which is incompatible with military destruction. Third, despite the public rhetoric, the practical barriers to invasion remain formidable.
That said, Wang acknowledged that the feedback loop between anti-China public sentiment in the US and politicians capitalizing on that sentiment was creating a dangerous dynamic. The risk was not irrational escalation but a vicious cycle where each side’s actions reinforced the other’s worst assumptions.
Editor’s Note: What Has Happened Since September 2023
Updated March 2026
Several of the themes Yan Wang discussed have played out in ways that confirm the structural shifts he identified, while some cyclical assumptions have required recalibration:
• China’s GDP: China recorded 5.0% GDP growth in both 2024 and 2025, meeting official targets. However, domestic demand remained weak, with near-zero consumer inflation and a property sector that continued to contract. The IMF projects 4.5% growth for 2026, with the transition to consumption-led growth still incomplete.
• EV dominance confirmed: China became the world’s largest car exporter in 2023 and has held that position since, shipping 5.5 million vehicles in 2024. BYD overtook Tesla as the world’s largest EV manufacturer by volume. EVs and hybrids now account for nearly half of China’s passenger vehicle exports.
• Tech self-sufficiency accelerating: China’s push into semiconductors, AI, and advanced manufacturing has intensified, partly driven by US export controls. The 15th Five-Year Plan (2026–2030) doubles down on industrial upgrading and technological self-reliance.
• Geopolitical tension: US tariffs on Chinese goods rose to over 100% under President Trump before being reduced to 30% in May 2025. The EU imposed additional tariffs on Chinese EVs. Despite trade friction, China’s total merchandise trade continued to grow, supporting Wang’s observation that macro-level trade flows have proven resilient even as specific companies face restrictions.
• EM performance: Emerging market equities had a mixed period following the podcast, with China’s property sector drag offsetting gains in technology and consumer recovery. EM local currency bonds benefited as several central banks in Latin America and Asia began easing cycles ahead of the Fed, consistent with Wang’s thesis.
The core structural argument from the conversation, that China’s growth model is shifting from infrastructure-driven commodity demand toward technology, EVs, and consumer services, has been validated by subsequent data. Whether this structural advantage translates into sustained financial market outperformance remains an open question, particularly given the unresolved property downturn and the uncertain trajectory of US-China trade relations.
Key Takeaways for Canadian Investors
• Different cycle, different winners: The traditional China-boom playbook of overweighting commodities and the Canadian dollar may not capture the strongest growth sectors this time. Consumer services, EVs, and technology are where the structural momentum sits.
• EM valuations remain compelling: After a decade of underperformance against developed markets, EM stocks and bonds offer a favourable entry point, particularly for investors willing to look beyond the headline risks.
• China exposure is optional within EM: EM ex-China strategies can capture most of the cyclical upside with less direct political risk, though investors forgo exposure to China’s unique technology sectors.
• Geopolitical risk is real but manageable: Rational economic self-interest on both sides makes a hot war unlikely in the near term, but the feedback loop between public sentiment and political action deserves ongoing monitoring.
• Local currency EM bonds offer a dual tailwind: Higher real yields than developed markets, combined with potential currency appreciation as the US dollar moderates, create an attractive total return profile.
Frequently Asked Questions
About the Guest
Yan Wang, CFA is the Chief Emerging Markets and China Strategist at Alpine Macro. Before joining Alpine Macro, Yan spent 15 years at BCA Research as Managing Editor and Chief Strategist for BCA’s China Investment Strategy service. He holds an MBA in Finance from McGill University, an M.A. in Economics from the Tianjin Institute of Finance, and a B.A. in Finance from Nankai University.
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