Industrial production in China is set to post robust growth this year thanks to state-driven investment, supply-side stimulus, and a boost in “green” manufacturing. Its performance will outstrip the US and Europe, and raises the prospect of a renewed tensions between East and West.

Output in the country’s industrial giants is forecast to post growth of 5% for the second year running, dwarfing the 1,1% in the European Union and the UK and 1,4% in the US, according to Oxford Economics’ latest forecasts.

Alongside an upturn in the chip cycle, which will support manufacturing in Taiwan, Korea, and Singapore, this will underpin a forecast acceleration in global industrial output growth to 2,7% in 2024 from just 1,8% last year.

China’s relatively solid manufacturing outlook is rooted in continued supply-side stimulus concentrated in green equipment and high-tech manufacturing as part of the economy’s shift away from low-value mass manufacturing. Last year saw the acceleration in Chinese output by the “new three” industries of electric vehicles, batteries, and renewables compared with modest growth in the “old three” industries of furniture, garments, and home appliances.

Strong production growth in strategic industries, combined with deflationary pressures and weak domestic demand, has meant Chinese exports in certain goods categories have surged, prompting accusations of dumping among EU policymakers. The US has maintained tariffs on certain Chinese goods, while likely Republican presidential candidate Donald Trump has confirmed that he would impose tariffs of 60% or higher on Chinese goods.

Meanwhile, amid the strength in high-tech and green sectors, the ongoing property sector slump is set to constrain heavy industries, like construction and metals production, contributing to a high amount of variability across the spectrum of Chinese industrial activity in 2024.

Sean Metcalfe, lead economist at Oxford Economics, says: “China is expected to retain its momentum in the green and high-tech sectors. Should strong growth in price competitive exports in these sectors persist, trade tensions between China and the West could result in tariff escalation, which represents a downside risk for trade, global industrial activity, and the energy transition.”