(BEIJING) – China’s economy presents two sharply contrasting pictures. One shows rapid advances in robotics, artificial intelligence, solar power, electric vehicles, bullet trains, drones and commercial shipbuilding. The other shows vast numbers of vacant and unfinished residential buildings, shrinking population projections and industries operating at a loss once state support is withdrawn.
Both stem from the same underlying pattern of debt financed overinvestment in sectors lacking sustainable market demand.
Estimates put the number of vacant or unfinished residential units as high as 90 million. Official population figures project a loss of more than 130 million people by 2050, roughly the current population of Mexico, and a possible reduction approaching one billion by 2100. Leading analysts consider the official population totals themselves overstated. One former deputy head of the National Bureau of Statistics noted that experts offered widely varying estimates of vacant homes, with the most extreme suggesting capacity for three billion people. While that figure is almost certainly inflated, it underscores the scale of the problem visible to Chinese observers.
German carmakers illustrate the competitive pressure from China. In the third quarter of 2025 combined operating profits at Volkswagen, BMW and Mercedes-Benz fell nearly 76 percent from a year earlier, the lowest since the 2009 global financial crisis. Porsche reported a sales profit decline of more than 90 percent in 2025. Over five years Chinese car imports fell from one million to under 500,000 while exports rose from under one million to ten million. Current Chinese production capacity could meet roughly two thirds of global vehicle demand. Much of the expansion centres on electric vehicles. Yet Chinese auto profit margins stood at just 3.2 percent in early 2026, comparable to or below those of the German firms. Only three of more than 70 Chinese electric vehicle brands were profitable by mid 2026. The government introduced rules barring sales below production cost after widespread loss making competition.
Solar power followed a similar trajectory. China produces approximately 93 percent of global polysilicon, 97 percent of silicon wafers, 92 percent of photovoltaic cells and 86 percent of finished modules. Annual growth averaged about 44 percent for a decade through 2024 and came to represent nearly a quarter of the country’s energy production capacity, though actual generation was closer to 11 percent. Growth then slowed sharply: from 148 percent in 2023 to 28 percent in 2024 and 14 percent in 2025. New monthly installations in 2026 fell 56 percent year on year in March and 79 percent in April. The 22 largest Chinese solar companies together lost 1.5 billion dollars (approximately 1.11 billion pounds or 1.30 billion euros) in the first quarter of the year. Factory utilisation across the supply chain averaged only 44 to 54 percent in 2025 before the further decline. Roughly half of production capacity sits idle.
The slowdown followed the withdrawal of government subsidies that had previously covered a substantial share of installation costs. Without that support the economics of solar remain challenging. Generation costs for new builds can range widely depending on location and sunlight. Once battery storage is included to address intermittency, utilisation costs rise significantly, often exceeding those of coal. China continues to generate about half its energy from coal and has defended its right to increase carbon emissions. Much of the solar equipment exported to reduce emissions elsewhere is itself produced using coal fired power.
China’s limited domestic oil and natural gas resources provide a strategic rationale for the solar, battery and electric vehicle push. The country consumes around 16 percent of global oil yet produced only about 4.5 million barrels of crude per day last year while importing an additional 11.5 million barrels daily. Strategic petroleum reserves have already been drawn down during recent supply disruptions. Coal stockpiles offer a partial buffer for electricity but cannot power conventional vehicles or modern military systems. Electric transport and domestic renewable capacity therefore represent an attempt to reduce vulnerability to external energy shocks even at a national economic loss.
The same mechanism of debt financed capacity building appears across sectors. When total government liabilities are calculated to include local government debt underwritten by the centre and the obligations of capital intensive state owned enterprises, the figure exceeds 300 percent of gross domestic product. By comparison the equivalent United States figure stands near 130 percent. Successive waves of overbuilding in real estate, solar and now electric vehicles and related technologies have left idle factories and empty cities while attention shifts to the next high profile advance.
China’s technological gains and its abandoned infrastructure are therefore not contradictory. Both reflect a pattern of state directed investment that prioritises capacity and strategic autonomy over sustained commercial viability.
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