China’s economy is undergoing a profound structural slowdown

The ongoing wave of protests in China against the gratuitous zero-covid policies of the government led by Xi Jinping has naturally attracted international attention. The long sequence of lockdowns in almost three years of the pandemic has also disrupted economic activity in many important production hubs in the country.To get more china economy news today, you can visit shine news official website.

The United States is in danger of missing a profound change in the economic component of China’s geopolitical strategy. Chinese President Xi Jinping has downgraded the Communist Party’s ambition to overtake the U.S. in economic size (though that is still officially a goal). Instead, his priority is to minimize China’s dependence on other countries and maximize its ability to coerce them economically. This is an implicit acknowledgment that China can’t achieve the aim of being a truly rich nation anytime soon. But the U.S. cannot afford to be complacent: China can wield its very large economy as a strategic weapon.

Just as the U.S. previously needed to respond to a China that was bent on becoming the world’s foremost economy, Washington now needs to respond to a China bent on long-term economic coercion to secure the interests of the Communist party and the Chinese nation. Domestic action by the U.S. is important, and is easier to achieve, starting with better understanding Xi’s goals. Internationally, to persuade friends and allies to limit their reliance on China, the U.S. must revive a moribund trade policy.

Xi clarified China’s new approach in a series of speeches in 2020, claiming that the “powerful gravitational field” of the state-controlled Chinese market can be used to reshape supply chains in Beijing’s favor. In Xi’s view, this is essential in what he’s called the “great struggle” against Western efforts to limit China’s technological advancement and target its import vulnerabilities.

China has, of course, long engaged in industrial espionage and coercive technology transfer. And Xi’s “Made in China 2025” industrial plan has, since 2015, provided sweeping government assistance to such sectors as semiconductors and electric vehicles. Xi now seems to believe that China must redouble efforts to tilt economic leverage in its favor, as Beijing responds to what it views as an evolving American strategy of containment. Xi may see the decoupling of the two countries’ economies as ultimately inevitable—and may now be actively advancing it, on his preferred terms.
At home, Xi evidently fears that a thriving private sector risks powerful constituencies developing outside party control—he has cracked down on activities perceived as threatening in this respect. With the party determined to retain control of the economy, potentially productive industries face many barriers to expansion. In their place are sectors that serve the party’s interests first. This is not conducive to innovation and scientific breakthrough and, along with deteriorating demographics and high debt, will continue to limit growth.

This hardly means that China has given up on competing with the U.S. and others, but it will do so through state-shaped technological development and, crucially, its preeminent position in global supply chains. China will be neither the world’s low-tech factory nor its leading tech pioneer, but will aim instead to make itself indispensable as a producer of high-value goods upon which even its adversaries depend. This is a perceptive and potentially fruitful alternative to rapid economic growth.

Regarding electric vehicles, for instance, China owns substantial overseas reserves of lithium and cobalt and is rushing to add more. It also seeks to become the premier processor for these minerals. Green-energy equipment may be made elsewhere, but it will rely on Chinese materials. In biopharma, China dominates the production and export of basic pharmaceutical ingredients and is looking to expand final manufacturing of pharmaceuticals.

In aerospace, Airbus, Boeing, and Bombardier will soon face a Chinese competitor, COMAC, whose planes look a lot like theirs. If the Chinese planes improve, the foreign firms will have more trouble selling theirs to China. Then COMAC will start exporting on a large scale, beginning with poorer countries. For semiconductors, the PRC has a strong position in testing and packaging at the end of the supply chain. It seeks to greatly expand the production of low-end chips. Without a better defense against Chinese oversupply, foreign competitors will be killed off, and China could dominate major parts of the industry.

If this proves to be the new order, the U.S. and a few other countries will remain richer than China, and their industries will make big breakthroughs, such as in mRNA vaccines and high-end microchips. Beijing will continue to largely absorb foreign innovation and then eventually drive foreign producers out of business. The dominant feature of the Sino-American commercial competition will not be a race based on economic growth or on technological advancement, as many anticipate. Rather, through subsidies, coercive technology transfer, and unbalanced market access, inferior Chinese firms will win market share at the expense of more dynamic competitors.

China will still seek growth, just not as its main priority. It will spend heavily on science and technology. But its focus will be on strategic economic leverage. Beijing’s theory of victory in this clash is that its combination of strategic planning, manufacturing prowess, and a huge market will undermine foreign innovation, insulate the party from American pressure, and arm Beijing with more tools of economic coercion. This could also force more deindustrialization in the U.S.