China’s stock market, and the price of one of the commodities central to its economy, are sending starkly differing signals on the country’s prospects.

While iron ore, used to make steel, has plunged on fears that Beijing isn’t doing enough to reboot construction and manufacturing, equities have recovered after their recent swoon as investors bet that corporate earnings are on the mend. A closer look reveals a split between the old and new economies as President Xi Jinping pushes for growth drivers to replace cratering demand from the property sector.

Stocks have certainly benefited from government-led buying to support prices, as well as looser monetary policy. But they’re also signaling enthusiasm for some emerging industries. At the same time, iron-ore’s rout has deepened as challenges continue to mount in the traditional economy and Beijing’s fiscal measures disappoint.

The CSI 300 Index of mainland shares has risen 13% from the five-year low it hit in early February. Its latest leg higher has mainly been driven by “growth sectors including AI and liquor, along with expectations of looser monetary policy,” said Chi Kai, chief investment officer at Shanghai Cosine Capital Management Partnership.

The benchmark iron-ore futures contract in Singapore, meanwhile, has fallen more than 20% this year and closed at its lowest since August on Monday.

STEEL SIGNALS
For around two decades, iron-ore was a useful proxy for a Chinese economy hitched to construction-intensive growth. The peaks and troughs of commodity prices were driven by Beijing’s periodic pushes to ramp up property and infrastructure spending. Breakneck urbanization and industrialization fueled demand and supercharged profits at global miners like BHP Group and Rio Tinto Group.

But Xi’s squeeze on the property sector is changing that model, and iron ore’s fortunes are now tied to more specific factors. Last year, the raw material’s price rose sharply thanks to three main factors — a push by developers to complete stalled housing projects, a rise in Chinese steel exports, and tightness in the supply of scrap steel.

Now, the danger is that the wave of property completions tails off without being adequately replaced by new starts. The expected correction in China’s construction activity has barely even begun, according to Capital Economics.

The government has touted public housing programs as a salve for the construction market, but “none of these props will be able to offset the weakness in underlying property demand indefinitely,” the London-based research firm said in a recent note titled The coming collapse of Chinese construction.

POLICY DISAPPOINTS
There was also disappointment that the National People’s Congress, China’s highest profile political event of the year which concluded on Monday, didn’t include stronger stimulus measures to back up the government’s 5% growth target. A top official reiterated Xi’s longstanding slogan that “houses are for living in, not for speculation,” a refrain that has reliably sent a chill through the real estate sector and related industries.

“Iron ore is driven by construction and infrastructure spending, but so far there have been no signs of massive fiscal stimulus by the government on that front,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “But for stocks, there are a bunch of positive factors.”

Sentiment in China’s equities market has improved markedly from the start of the year, when the country’s moribund stocks were among the worst-performing in the world. Now, investors are tentatively warming to the theme of a more high-tech economy.

While state purchases of equities by the so-called national team helped markets find a floor, there are also clear signs that sectors supposedly favored by Xi — from electric vehicles to semiconductor chips, solar power and artificial intelligence — are winning out.

BULL MARKET
The tech-heavy ChiNext Index entered a technical bull market on Monday, helped by big gains for leading new-energy firms. EV-battery giant Contemporary Amperex Technology Co. jumped 14%. Foxconn Industrial Internet Co., which makes AI servers, has more than doubled since mid-January.

“Iron ore is closely related with the real economy,” said Shen Meng, director at Chanson & Co. “But the Chinese government is now shifting to ‘new productive forces’ such as high-tech industries to boost the economy, and weakening infrastructure investment as a driver.”

Still, there are reasons not to count out iron-ore, which surprised investors with its gains last year.

The government could yet roll out more decisive measures to defend this year’s growth target, such as broader spending on infrastructure. And iron-ore, like all commodities, is subject to supply factors, where prices can only fall so far before high-cost producers are forced to curtail output.

“Stocks are likely to fall in the short term if the national team withdraws support, but the long term direction is up,” said Yang Junxuan, a fund manager at Shanghai Junniu Private Fund Management Co. “For iron-ore, demand is likely to continue to be weak — depending on what the government will do to boost consumption.”