Investments in artificial intelligence and growing industrial activity are supporting the US stock market, while weak domestic demand continues to weigh on Chinese markets.
The MSCI China Index has traded mostly sideways since 2010, while the MSCI U.S. Index has risen roughly sevenfold over the same period.
A similar picture is seen in technology stocks. The Invesco China Technology ETF has remained virtually unchanged since the global financial crisis, while the Invesco QQQ ETF has risen roughly seventeenfold.
The downturn in China's real estate market and low consumer confidence have been cited as key challenges for the world's second-largest economy. Consumer sentiment has yet to recover to pre-pandemic levels.
Real retail sales growth in April fell 1.2% year-on-year, the first negative reading since the pandemic. At the same time, industrial production grew by 4.1%.
The combination of weak consumption and rising factory output has led to excess industrial capacity, with manufacturers increasingly relying on exports to sell their products.
Bank lending growth slowed to 5.5% in May—the weakest pace since 2001, further evidence of subdued domestic demand.
In the US, industrial production has been on an upward trend since mid-2024.
Although output grew by only 0.1% in May, technology-focused industries continued to support growth. Semiconductors and other high-tech manufacturing sectors were among the most significant drivers of growth.
The study also points to artificial intelligence infrastructure as a significant source of investment. Technology production accelerated following the launch of ChatGPT in late 2022. Growing demand for electricity from AI data centers has been identified as another long-term driver for utilities and power generators.
The outlook for industrial activity could also improve thanks to rising defense spending, as the Trump administration aims to increase military spending next year.