China's economic power on uncertain speed (2024)

Trend:China's economic power on uncertain speed

A trend indicates a direction of change in values and needs which is driven by forces and manifests itself already in various ways within certain groups in society.

China grew from being an emerging consumer market into a powerful and influential economy in recent years. With strategic long-term targets designed to modernize its economy and society, it has transformed its economy into one with high-tech industry and become a nation with global influence. Driven by increasing middle class consumption, China has successfully modernised its domestic market and became a global leader.

China put tremendous efforts into its domestic infrastructure and subsequently into global infrastructure, which it built up through the global infrastructure development strategy known as the ‘Belt and Road Initiative (BRI)’ across Asia, Africa and Europe. The BRI is a strategy initiated in 2013 by China to connect Asia to Africa and Europe, via both land and maritime networks to improve regional integration, increase trade and stimulate economic growth. China uses BRI to strengthen its economic and political relationships with 140 partner countries. Recent global shifts in the international order showcase the transition of China’s foreign policy from one that focuses on internal development to one of external influence, not only in economic terms, but also military, diplomatic and normative, notably through a systematic discourse power strategy.

The long-term challenges for China’s economy are inter alia its ageing population, geopolitical tensions, and legal security issues.

This Trend is part of the Megatrend Expanding influence of East and South

Manifestations

Developments happening in certain groups in society that indicate examples of change related to the trend.

Economic dominance of China

China has long been considered a huge economic market for Western companies due to its sheer size and growth rate. Over time however, Chinese companies have developed their own capabilities and taken over the leadership of several sectors, supported by government plans such as the ‘Made in China 2025’ plan. With the 'Dual Circulation' strategy, China prioritises domestic consumption, supported by social media campaigns and education to instil Chinese supremacy. China has secured its position as a global powerhouse in high-tech industries, reduced its reliance on foreign technology imports through its own innovations, all of which have allowed it to become a direct added-value competitor. However, in some areas, catch up processes are uncertain.

China has the world’s largest banking assets. It is the world’s largest manufacturer. The world leader in digital innovation, green tech and e-commerce. China’s technology dominance is largely linked to network infrastructures, including telephony, electric and autonomous vehicles, surveillance technologies, drones, mass transport and construction technologies.

Signals of change:Datenna,Merics,IFRI,ECFR, MIT technology review, DGAP, Wall Street Journal, Bruegel

Chinese soft power expansion across Eurasia and Oceania

China launched a massive infrastructure development strategy in 2013 to boost economic integration and connectivity (in infrastructure such as roads, railroads, buildings, trade and investment) with neighbours and trading partners in Asia, Europe and Africa. It is called the Belt and Road Initiative (BRI, or One Belt One Road/OBOR), and it crosses land and sea corridors. It is driven by the Chinese ambition to become a nation with a pioneering global influence by 2050 and the need for economic growth through exporting their overcapacity in infrastructure construction capacity and related products (steel, concrete) to regions with deficits.

Financed by specific funds and the Chinese Asian Infrastructure Investment Bank, BRI is a huge regional integration project that facilitates trade. China involves more than 140 countries in it from Asia, Oceania, Africa and Europe, using their economic power. It is positioning itself as champion of globalisation, which could lead to a new world order - with China the new supreme leader. However, this also entails a risk for China as a creditor, when economies with lending contracts are in crisis.

Alongside the economic development perspective, China aims to use international relationships and interdependencies to push allies and supporters in international politics, like UN General Assembly or UN Security Council. This is accompanied by a media strategy with the largest network of correspondents worldwide exploited to shape the image of China and Chinese values, mind-sets and worldviews of people around the world. The Chinese BRI soft power strategy is accompanied by hard power elements with the opening of military bases globally, like 2017 in Djibouti and 2021 in Equatorial Guinea, that could shift global power dynamics.

Signals of change: ECFR, the Diplomat,NIICE, Foreign Affairs, IFW, SCMP, Digital China, Atlantic Council, Economic Times

Ageing society, the mid-term challenge for China's economic power

China’s population is one of the most rapidly ageing populations globally due to its rising life expectancy and the ‘one child’ policy that was in place there for about 40 years (from 1982 to 2016). It led to a severe gender imbalance in the society. From 2030, the growth of people aged 65 and above will be more than 11.2 million per year. There will be a transition in the population from the 'young-old' (i.e. 60 to 80), to the 'oldest old' (i.e. over 80).

The large supply of young workers in the manufacturing industry has been the basis of China's economic model to date. This demographic shift (as these young people age) will come with social and economic challenges for the future, such as providing senior care, financing the health and pension systems, a future workforce gap, and even lack of young women for marriage, which is leading to bride trafficking and human rights violations.

Signals of change: Human Rights Watch, New Frontiers in Regional Science, Bloomberg Businessweek, ChinaPower,PRB,MDPI, Caixin Global, Global Times, Yahoo Finance, Wall Street Journal, Reuters

China’s challenges in the economic and international arena

China’s attractiveness for foreign direct investors is questioned for several reasons. With the dual circulation strategy, China wants to strengthen its local industry and reduce dependence on foreign partners and decrease the export dependence of its industry. With 'cyber great power' China tries to escape reliance on foreign technology. Joint venture relationships of foreign companies create one-sided dependencies on Chinese business partners and government ambitions. Governmental interference in business activities reduces reliability in companies.

Foreign intellectual property rights are not properly protected in China. Fear of technology espionage hinders the frictionless diffusion of innovative technologies across borders. Human right violations in China involving forced labour in Chinese sites of Western companies invites criticism and creates risks of consumer boycott, as well as trade sanctions.

Internal market challenges, such as the overheated debt financed real estate market, holds economic risks. Political challenges could create upheaval as the Chinese people’s policy support strongly depends on positive wealth developments that rely on high GDP growth rates. However slow growth rates are expected.

Signals of change: Foreign Policy, China Briefing, Merics, DGAP, Insider Intelligence, Republic World, IRSEM, China File, The Diplomat, Brookings

Interesting questions

What might this trend imply, what should we be aware of, what could we study in more depth? Some ideas:

• How can the EU ensure a level playing field in economic collaboration for European companies in China, Chinese companies in Europe and when European and Chinese firms are competing in other parts of the world? How can the EU counteract Chinese ambition to change the world’s business rules in favour of their state-controlled economy?
• How can the EU oppose the Chinese global economic and diplomatic influence in economies that are of strategic interest for Europe (such as neighbouring regions, Africa)?
• What if trade with China was drastically reduced, either as a result of increasing self-sufficiency of China, or sanctions and boycott due to international conflicts?
• What if China and other powers like Indian and Gulf states take a stronger influence on technology standardisation and thus influence the users with their values in all areas of life?
• What if China’s economic growth stagnates, leading to social and political upheaval in the country?