China has been steadily transitioning its economy toward self-reliance, in what could eventually turn out to be one of the most relevant strategic developments of our time. In essence, Beijing intends to reduce dependence on the outside and bolster capabilities in key sectors, so as to increase resilience and ensure adequate economic activity even in the face of heightened turbulence.
So, in recent years, China has been actively modernizing its industrial base, through policies including support for manufacturers, development of smart manufacturing, deployment of 5G in industrial facilities, the creation of manufacturing clusters, and diligent activity in the key field of semiconductors. Furthermore, Beijing recently stated China must develop self-sufficiency in food, as well as in such strategic materials as oil, natural gas and minerals, including by means of reserve systems of such materials. Likewise, Chinese President Xi Jinping has asserted that the Chinese people’s grains should be “mainly produced by themselves,” thus underscoring Beijing’s increased interest in food security.
China’s self-reliance paradigm doesn’t necessarily mean strict self-sufficiency nor a farewell to interdependent markets. In effect, it’s largely built on the “dual circulation” strategy, which aims to strengthen the Chinese economy by creating steady growth in the domestic market, and synergizing that with continued openness to the outside. China is, after all, one of the world’s largest economies, and it’s essentially implausible that it would willingly let go of any significant share of the foreign trade upon which its economic vigor and its claim to heightened global influence depend. What’s more likely is that China will try to dramatically strengthen its transnational supply chains, while working to make itself as impervious as possible to global turbulence—including economic disruptions, but also potential sanctions and trade wars—, on the way toward Beijing’s stated purpose of global leadership by mid-century.
Key to Beijing’s designs is the achievement of self-reliance in science and technology, with Xi saying China needs to “master more core technologies”, and uninterruptedly “extend the innovation chain and improve the industrial chain.” Even in 2015, Beijing had already implemented Made in China 2025, a state-led industrial drive to achieve 70 percent self-reliance in high-tech industries by 2025. Then, in March 2021, it went on to release China’s Fourteenth Five-Year Plan, aiming to foster development in advanced fields—including robotics, quantum computing and artificial intelligence—, and have China bolster its abilities in the tech sector.
China’s drive for tech self-reliance will require building up domestic capabilities and bridging the skills gap between Chinese tech companies and their foreign counterparts. Thus, as pointed out by Andrew Browne, writing for Bloomberg, it will entail more—not less—cooperation with the Western tech sector. That seems to be fostered by the plan for a “unified domestic market”, largely intending to make the Chinese market more appealing to global companies. Yet, making China engaging to foreign companies that are already there or that might be considering moving in is just part of the story. Then comes the issue of getting them to comply with Beijing’s will, and that may eventually require more coercive means. As written by Zoe Liu, affiliated with the Council on Foreign Relations, China has already created a legal framework by which foreign companies could be forced to choose “either the Chinese market or the Western market,” or even penalized for “cooperation with foreign actions viewed as threatening.” It remains to be seen how China will respond to the impacts of the recently signed U.S. Chips and Science Act, by which the U.S. federal government will incentivize semiconductor firms to base advanced chip research and manufacturing in the U.S., thus potentially harming China’s pursuit of self-reliance in such technology.
In her article, Zoe Liu posits that China is hardening itself for economic war, while adding that, in the near future, Beijing will focus on sanction-proofing the Chinese economy “while bolstering its offensive geoeconomic capabilities.” Financial resilience in the face of the dollar system is key for both purposes. So, whereas China is deeply invested in the dollar-led global financial system, it is nonetheless developing an alternative to SWIFT, in the form of CIPS, while also working on the further internationalization of the yuan. Even last May, Hong Kong’s South China Morning Post reported that “to further its international ambitions, China wants to turn Shanghai into a yuan asset hub, accelerate trials of its sovereign digital currency and make the yuan an anchor currency for Southeast Asia and Belt and Road countries.”
Russia could actually turn out to become one of China’s key partners in establishing a yuan-based financial framework. Rather than having been shaken by the Russian aggression on Ukraine, China’s economic ties with Russia have instead been boosted since the beginning of the war. Trade between the two countries has been growing, with China becoming an avid importer of Russian oil, new trade arrangements being signed, and Russia greatly increasing its international use of the yuan, even as it considers buying yuan and other currencies for its wealth fund, after having had its dollars and euros frozen. A further deepening of ties could grant China privileged access to Russia’s abundant natural resources and raw materials, which would tend to strengthen China’s supply chain resilience and, incidentally, favor its designs for self-reliance.
Beijing’s pursuit of self-reliance has been taking place against the backdrop of an ever more assertive and imperial strategic posturing. This is what seems to be signified by China’s increasing penchant for social control, by its disciplination of Hong Kong, and by its cultural genocide of the Uighur in Xinjiang. It’s also what seems to transpire from China’s intensifying territorial disputes with neighboring states, and likewise from its escalating provocations on Taiwan—including Beijing’s ostensibly aggressive reaction to U.S. House Speaker Nancy Pelosi’s visit to Taipei.
China seems bent on affirming dominance at home and in its regional sphere, while further increasing its influence over the Indo-Pacific and the Global South at large, where it has come to build a vast web of relations. But Beijing’s looking even farther than that, and it’s been working to transform the international system according to sinocentric and autocratic standards. A part of that is Xi’s Global Security Initiative (GSI), envisioning a new international security framework in opposition to the U.S.-led liberal security order. The GSI is already backed by such states as Indonesia, Pakistan, and Russia itself.
Here, it’s significant that Beijing has been visibly deepening strategic and security ties with Russia, as expressed by its statement that it intends to cooperate with Moscow in military technology, and also by the joint exercises led by the two countries last May just outside Japan’s territorial airspace, right as U.S. President Joe Biden visited Tokyo. Furthermore, in mid-June, Xi talked with Russian President Vladimir Putin to state Beijing intends to work with Moscow in matters of sovereignty and security, and also that it wants to deepen mutual strategic coordination and jointly cooperate toward the transformation of the international system.
China’s growing international assertiveness is backed by the rapid expansion of Chinese military capabilities—recently described as the largest since World War II. That build-up seems to be largely directed against the U.S. and its allies, whom Beijing accuses of wanting to create an Indo-Pacific NATO to constrain China. The same goes for Chinese Foreign Minister Wang Yi’s comment that China has the “courage to fight a great struggle,” and also for Xi’s remark to Biden that “those who play with fire will perish by it”—an observation seeming to bear a thermonuclear insinuation.
So, this is the strategic context in which China has been transitioning to self-reliance.
It’s true that there’s nothing wrong with self-reliance in itself, and that the Chinese project for self-reliance may simply express the purpose of bolstering China’s economy. However, in an era of globalization, the pursuit of self-reliance, when accompanied by potentially hostile geopolitical moves, increased belligerence, a military build-up, and escalations in internal repression, could very well be taken for an attempt to build strategic capacity for prevailing amidst conditions of heightened geopolitical instability. Here, it’s relevant to note that the use, by the Chinese Communist Party, of the concept of “self-reliance,” or “zili gengsheng,” goes back to Mao’s era, during which it provided a reality principle for the policies of a disciplined Maoist China vis-à-vis the outside world.
The rise of a strategically unpredictable China makes it clear, along with Russian aggression, that the West needs to greatly increase resilience, by means of reindustrialization and supply chain diversification. To do this, the West will have to actively work with partners in the Global South—including India, Brazil, Mexico, Nigeria, South Africa and ASEAN, to name but a few—, while offering those countries, many of which are now interdependent with China, effective policy options for development and modernization.