In contrast with its 12th Five-Year Plan (2011-2015), China’s 14th Five-Year Plan (2021-2025) is more domestic oriented and puts an emphasis on boosting domestic demand for consumption and investment. It aims at enhancing the role of consumption in economic growth and allows investment to play a key role in improving the supply structure. This shift is expected to lead to a stronger domestic market and stronger demand for consumption and investment. It also aims at expanding investment opportunities by optimising the investment structure, improving the investment efficiency, and maintaining reasonable investment growth.
However, the 14th Five-Year Plan is centered on reforms to develop a socialist market economy. Reforms are undertaken to “modernise Chinese state enterprises with Chinese characteristics” and “guide domestic private entrepreneurship.” The objectives of the 14th Five-Year Plan do not align with the “go out” strategy of the late 1990s and the policies elaborated in the 12th Five-Year Plan to have globally innovative and competitive Chinese companies in global markets.
Recent global political, economic, diplomatic, security changes exacerbated by Russia’s invasion of Ukraine impact aspects of globalisation as seen in the past. A multipolar world with diversified economic relationships often driven by political, diplomatic and security ties between different countries and regions of the world is replacing a unitary globalised economy. China plays an important role in the world economy and currently is not immune to current geopolitical and economic changes which impact both its domestic economy as well as its relations with other countries in various aspects: trade, investments, production, manufacturing, security among others.
The piece explores how China navigates its own challenges, global shifts and decoupling.
The U.S.-China battle
A more diverse globalised world is needed and is required due to global rivalries and political and economic tensions without putting aside security considerations between developed, emerging and developing economies. China is central to these new developments for a restructured global economic order as developed economies (mainly the United States, EU), emerging economies and developing economies either tackle challenges posed by China’s global economic influence, position themselves as new important actors or diversify their economic relations. Besides, trade tensions between the United States and China lead to a formation of trade blocs with countries which share the same political and economic interests; then contributing to the fragmentation of world trade.
Since its return to the international arena and progressively from 2010, China has increased its role in international organisations, mainly through pushing for its agenda and promoting its global political and economic influence. Besides, Beijing is exporting its model of political governance and contributing to foster and create multilateral organisations in parallel with the existing ones.
For the past three decades, China has dominated the global economic sphere with a focus on trade and investments based on policies put in place by Chinese state political and financial agencies to enable mass production to supply export markets with ‘made in China’ products as well as enable Chinese companies to venture to global markets for investments. However, China is currently facing an economic slowdown with an economic growth at about 5 percent, the lowest for decades, and with forecasts showing declining growth rates for the years to come.
Changes for a new globalised economy revolve around economic factors with trade sanctions between the United States and China, sanctions which have political, diplomatic and security ramifications for both as well as their global partners. Russia’s invasion of Ukraine has consequences on the current and future globalised economy. Developed economies’ position vis-à-vis China entails security and economic challenges even though it remains their important trade and investment partner.
In the process of new globalisation, ongoing political and socio-economic changes in China with an increased political role of the state through the Chinese Communist Party (CCP) have affected the country’s relation with its partners. In the current global geopolitical arena, China relies on economic self-reliance rather than openness with more control from the state and the CCP. This situation has led to trade sanctions and investment restrictions between China and developed economies with consequences on global production, manufacturing, supply-chains, labour, market expansion, trade and investments globally. China under Xi Jinping is exerting more state control over global private entrepreneurship which has driven Chinese companies to venture abroad and contribute to China’s outward foreign direct investment. This new approach contrasts with the ‘go out’ strategy of the late 1990s based on reforming and opening up.
How China navigates its domestic political and socio-economic changes against global shifts?
Faced with global geopolitical and economic shifts coupled with its own domestic political and socio-economic changes, China is navigating the future of its companies (state-owned and private). Such a strategy for a more domestic economic focus in order to develop a socialist market has impacts on the global economy. More and more, with China’s economic self-reliance as stipulated in the 14th Five-Year Plan, global production, manufacturing, supply-chains, trade in which China plays an important role will be affected. Since 2018, China has pursued a clear, stated objective of self-reliance. China has been following a long-term strategy for economic self-reliance which aims at reducing its dependence on foreign economies which in the past contributed to its economic development through investments, technology transfer, capacity building among others. Under the current geopolitical context, due to competition, rivalry, trade imbalance among others; the United States and EU call for decoupling from China. In 2023, during the National People’s Congress, president Xi Jinping clearly stated that China should work towards a greater self-reliance. While decoupling has economic consequences, its root causes are political with on the one side China which exerts more state control on its companies and is less in favour of a globally integrated liberal market with fair trade rules and on the other side developed economies which aim at countering China’s global political and economic influence. For China, decoupling means to switch its focus from economic growth to economic control by eliminating its dependence on foreign countries and corporations for critical technology and products; facilitating the dominance of domestic firms in China; and exerting that dominance into global competitiveness. However, China’s economic slowdown impedes the future of Chinese private companies which are reluctant to invest as private sector business confidence remains low.
Domestic political context in China and the United States coupled with economic tensions between the two countries is determinant to the new economic order through decoupling.
While China has elaborated strategies for its economic self-reliance to counter the decoupling process by developed economies with no signs of reversing, a more fragmented global economy with a new reality of globalisation is underway. These shifts are reshuffling the global economy with countries restructuring their economy and rebalancing their policies for their global engagement. Decoupling and China’s economic self-reliance contribute to fostering a fragmented globalised economic world, thus leading to challenges with political, diplomatic and security ramifications.
Dr. Daouda Cissé is a researcher specialized in China studies and Africa-China relations. He is currently a research consultant (non-resident) at Hybrid CoE, Helsinki, Finland. He was a senior researcher at the German Institute of Development and Sustainability (IDOS), Germany and an associate at Megatrends Afrika from April 2022 to March 2023. He was a visiting scholar at National Chengchi University, Taiwan (2021). Before that, he worked at the China Institute, University of Alberta, Canada and at the Centre for Chinese Studies (CCS) at the University of Stellenbosch, South Africa. He was awarded a PhD degree in Economics from Zhongnan University of Economics and Law, Wuhan, China. He has published several papers on Africa-China trade and investments, Chinese multinational companies, Chinese investment policies in Africa.
