Will AI healthcare be China’s new global growth engine?

China’s factory activity unexpectedly slipped into contraction for the first time in five months, and construction activity fell to its lowest since the pandemic, underscoring a divide in the nation’s economy that complicates efforts to revive growth.The official manufacturing purchasing managers’ index (PMI) dropped to 49.2 in July, missing the 50.1 median estimate in a Bloomberg poll of economists. Construction and services, part of non-manufacturing PMI, tumbled to 49 from 50.2 a month earlier, the government statistics bureau said on Friday. Both figures are below the 50 threshold separating growth from contraction.On Thursday, China’s top decision-making Politburo dented hopes for new stimulus measures as booming exports led by Artificial Intelligence (AI) components offset weak domestic demand and slumping infrastructure investment. The measured tone in a post-meeting summary suggests that policymakers consider existing programmes to be sufficient to hit a full-year growth target of 4.5 per cent to 5 per cent, even after expansion cooled to 4.3 per cent in the second quarter and the nation’s stock market suffered one of its worst months in a decade.The government will “roll out pragmatic and effective new policies in a timely manner”, according to the summary published by Xinhua. There was little detail on what these measures might be (see SCMP Plus Between the Lines). One concrete step was to increase the pace of public spending. A months-long slump in government expenditure has been a key drag on growth.A plenary session of the ruling Communist Party’s Central Committee would take place in October, focused on self-governance, Xinhua said. The conclave is likely to be the most important party gathering before a leadership reshuffle at the 21st party congress in autumn 2027.Related news: Chinese and US trade negotiators held a call on Thursday, preparing the ground for President Xi Jinping’s September visit to the United States. They discussed a growing list of tensions amid a trade-war truce. Chinese Vice-Premier He Lifeng voiced “serious concern” over recent US measures, according to Xinhua. US Treasury Secretary Scott Bessent “emphasised that we expect Beijing to fully meet its commitments on rare earths and US agricultural products”, according to a post on his X.com account. US Trade Representative Jamieson Greer was also on the call. The week that was Tech IPOs: Memory-chip maker CXMT became the most valuable company listed in mainland China after surging more than fivefold on its Shanghai Star Market debut. Zhongji Innolight, a supplier of optical transceivers used in data centres, fell on the first day of trading after Hong Kong’s biggest initial public offering (IPO) in seven years. The stock surged on Friday amid a global AI rebound. A Shanghai company reportedly began mass production of chipmaking machines. First-half profits at China’s major chipmakers skyrocketed more than 2,500 per cent. DeepSeek is planning to build a 1-gigawatt AI data centre in Inner Mongolia, Bloomberg News reported, citing people familiar with the matter. China got less than half of its electricity from coal in the first six months of the year, a milestone in the shift to renewable energy. China tensions: US regulators barred imports of robots and power inverters on national security grounds. The ban, which mainly hits Chinese companies, covers market-leading smart vacuum cleaners. The US also sanctioned mainland Chinese and Hong Kong companies accused of shipping Iranian oil to China or supporting Iran’s Mahan Air. President Donald Trump said he would be “quite disappointed” if China’s Xi broke a personal promise not to arm Iran. China’s commerce ministry published a 10,000-character-plus statement rebutting Western claims of industrial overcapacity. International relations: Brazil’s President Luiz Inacio Lula da Silva agreed to accelerate talks on a China-Mercosur trade agreement during a call with Xi. The move is a striking reversal because Brazil has long opposed a deal by the South American trading bloc. Xi also told visiting Slovak President Peter Pellegrini that China and Slovakia should explore cooperation in clean energy, robotics and AI even amid mounting China-EU frictions. Finance moves: China imposed personal income taxes on offshore trusts, closing a loophole long used by wealthy individuals. Panda bond fees will be waived from September until the end of 2028 in a bid to encourage more overseas companies to sell onshore yuan debt. Shanghai Clearing House announced plans to expand services for offshore yuan bonds and other products. Hong Kong’s exchange listed a US$1.5 billion Malaysia Islamic sovereign bond. Corporate updates: Online travel agent Trip.com was fined 5.2 billion yuan (US$765 million) for “monopolistic conduct” in China’s most significant antitrust action against a major internet platform since a 2021 tech crackdown. Zijin Gold scrapped the C$5.5 billion (US$3.9 billion) takeover of Allied Gold after failing to get Chinese regulatory approval. The company instead agreed to buy a minority stake in the Canadian miner. Elsewhere, regulators stepped up a crackdown on insider trading and tightened rules on the sale of surplus military kit. Carmaker moves: Electric vehicle (EV) giant BYD said it would unveil its first humanoid robot in August. Brazil became the largest market for Chinese vehicle exports ahead of Russia after shipments more than doubled in the first five months of the year. The South American country was the No 6 market in 2025. A new-generation Chinese-built car carrier made its maiden voyage to Europe from Shanghai carrying a record number of vehicles. China may increasingly seek to use its EV dominance as geopolitical leverage. The week ahead Military matters: The People’s Liberation Army marks its 99th anniversary on Saturday, as well as starting the final countdown to meeting its centenary goals. Taiwan begins its annual Han Kuang military drills on Wednesday. The 10-day exercise features unscripted drills, integrated urban resilience operations and simulated mobile internet disruptions. Economic indicators: July trade figures, due on Friday, are likely to show that China’s export growth cooled to 22.3 per cent from 27 per cent in June, according to economists polled by Chinese financial data provider Wind. Import growth may ease to 24.2 per cent from 36 per cent. S&P Global releases its RatingDog China manufacturing PMI on Monday followed by services on Wednesday. The US Bureau of Economic Analysis posts the with China and other countries on Tuesday. HSBC earnings: Hong Kong’s dominant lender, HSBC, releases half-year results on Tuesday. Investors may watch for further progress in slimming global operations after the bank agreed to sell Singapore insurance operations to Allianz for S$2.7 billion (US$2.1 billion) last week. Cathay Pacific posts its interim results on Wednesday. The airline will also raise fuel surcharges by 41 per cent on most passenger flights from Saturday due to higher oil prices. Unitree Robotics will launch its 4.2 billion yuan Shanghai IPO during the week. Hong Kong news: Trading of begins in Hong Kong on Monday as part of China’s efforts to boost international use of its currency. Hong Kong’s new ride-hailing regulatory regime starts the same day, while tighter rules on moneylenders take effect from Saturday. China rules: New minimum targets for renewable energy use in key Chinese industries will kick in from Saturday. Guidance designed to improve the quality of panda bond credit ratings also comes into force the same day along with new standards for consumer loans and repairs to new-energy vehicles. Soccer giants: English Premier League side Manchester City take on Italian champions Inter Milan on Saturday as part of the Hong Kong Football Festival. Another Anglo-Italian match-up follows on Wednesday between Chelsea and Juventus. Last year’s Football Festival drew more than 100,000 fans to the city’s Kai Tak Stadium.