China's K-shaped economy to last two more years, Robin Xing says

China's economy will remain K-shaped for at least another two years, with AI- and export-led sectors staying strong while housing and consumption remain weak, Morgan Stanley chief China economist Robin Xing said on Tuesday.

Speaking at Hong Kong Venture Capital and Private Equity Association's Greater China Private Equity Summit in Hong Kong, Xing said China was benefiting from a global AI and energy investment cycle that should support double-digit export growth for years.

But he said those gains would not easily translate to broader domestic demand because the new growth sectors are capital-intensive and create limited jobs. That means the spillover to household income and consumption will remain weak.

The property sector will also stay a drag, he said, adding that it could take about two more years for housing inventories in many mainland cities to return to more normal levels. Rental yields in many cities are still below mortgage rates, limiting incentives for home purchases.

Xing also said China was taking a different AI path by focusing on open-source, affordable models that can be deployed quickly by factories and small firms. He estimated faster AI adoption could lift China's total factor productivity by more than 3.5 percentage points by 2035.

To revive consumption, Beijing may need to channel more resources into social welfare for migrant workers and lower-income households, he said. A stronger safety net would help reduce precautionary savings and unlock spending.

Effie Zhang

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