The Morning Download: China’s Tech Boom Masks Deep Economic Strains

What's up: Marketers face pressure, layoffs over AI savings; data-center construction set to pass office-building construction; readers share their fave books of the year.

Good morning. DeepSeek’s breakout this year showed China can go toe-to-toe with the U.S. in top-tier tech. As access to Western tech narrowed, Beijing has leaned hard into self-sufficiency, lifting R&D spending almost 50% since 2020.

But as the WSJ's Brian Spegele reports, Beijing’s gains are increasingly out of whack, with the state’s heavy-handedness in directing investments fueling enormous waste.

Too many money-losing companies. China had 129 EV and plug-in hybrid brands last year, but only 15 are likely to make it to 2030, according to AlixPartners. And with more than 150 humanoid-robot companies now in the mix, officials are already warning of a looming glut.

Big parts of China's economy remain a mess. The hundreds of billions of dollars China spends each year on domestic technology also eats away at funding for rural education. Home prices are down 17% since the pandemic, according to the Bank for International Settlements, and uncertainty over China’s economic future has many people tightening their belts.

Rapid investment cycles, crowded sectors, a thinning safety net and growing government sway over tech decisions? It all sounds so... familiar. But China isn’t just nudging markets, it’s directing capital at industrial-policy scale. The lesson for both China and the U.S.: Don’t mistake technological momentum for economic stability, and don’t assume the tech dynamics in one country map cleanly to the other.

Spending on data-center construction looks poised to surpass office-building construction as soon as next year, according to U.S. Census Bureau data.

Real-estate firm JLL predicts that North America could see $1 trillion worth of new construction of data centers between 2025 and 2030. 

But there are limiting factors to the boom, starting with securing electricity, which remains a question mark in many areas. The Trump administration's decision Monday to halt construction of all U.S. offshore wind projects, removing a source of electricity generation, probably did not help. 

Also on Monday, one data center customer recently made a move to help address that electricity issue. 

Alphabet agreed to buy renewable-energy developer Intersect for $4.75 billion in cash and debt, WSJ reports. The deal adds projects in development, gigawatts of generation capacity, and Intersect’s team, while keeping operations separate. 

Promised savings is about to get all too real for marketing departments, the WSJ Leadership Institute's Patrick Coffee reports. 

Thirty-six percent of chief marketing officers expect to reduce head count over the next 12 to 24 months “by utilizing AI or eliminating redundancies,” according to a new survey from executive search firm Spencer Stuart based on November interviews with approximately 90 CMOs and other marketing leaders.

At larger companies, the outlook was grimmer. Forty-seven percent of respondents at companies with $20 billion or more in revenue said they expect to cut staff over the next 12 to 24 months, and 32% already did so this year, the survey found.

The key factor is growing pressure to show returns on companies’ significant investments in AI, said Richard Sanderson, who leads Spencer Stuart’s marketing, sales and communications officer practice.

American customers are hoarding products in anticipation of restrictions against Chinese manufacturers DJI and Autel Robotics

The Federal Communications Commission on Monday capped a decade-long effort against China-made drones, banning all drones and critical components made in a foreign country, and all communications and video-surveillance equipment from major Chinese drone manufacturers SZ DJI Technology and Autel Robotics.

Drone owners are buzzing mad. The ban has been met with uproar from large swaths of the nearly half a million certified American commercial drone pilots. DJI accounts for around 70% to 90% of commercial, local-government and hobbyist drones in the U.S.