China is moving to the next phase of its rivalry with the United States, and signalling a renewed focus on self-reliance. Whether in innovation, industry or advanced technology, President Xi Jinping is betting this approach will ensure Beijing’s resilience amid intensifying competition.
This isn’t just about the economy. It’s also about security. Beijing and Washington agreed in October to a one-year pause in trade hostilities, but instability will define their relationship for years to come.
This is about more than the economy: Donald Trump and Xi Jinping in South Korea on October 30. Credit: Getty Images
While this isn’t a new strategy, Xi is doubling down in the face of the trade war and a slowing domestic economy. October’s export figures showed an unexpected slump, highlighting the challenges Beijing faces. The Chinese Communist Party’s Fourth Plenum last month offered some clues about the president’s priorities. Held once every five years, the gathering is made up of the CCP’s inner circle and, together with Xi, they set the course for party affairs and ideology.
In the communiqué, officials elevated science and technology as pillars of the next five-year plan, to be finalised in March. These aren’t empty slogans. Beijing sees US President Donald Trump as an agent of chaos and is preparing for a more turbulent global economy, note Neil Thomas and Lobsang Tsering in a new paper for the Asia Society Policy Institute.
China is using American pressure as a catalyst to accelerate domestic innovation, by pumping money into its local firms. It’s focusing on sectors such as aerospace, artificial intelligence and quantum computing, and reducing dependence on foreign suppliers. Beijing isn’t alone in pursuing a strategy of self-reliance. India has a similar, if less successful, policy to encourage domestic manufacturing and reduce dependence on imports, as does the US.
The world’s second-largest economy has pushed ahead with military-civil fusion, gathering the most advanced civilian research from around the globe and using it to modernise its defence forces. This allows China to develop dual-use technologies, so that breakthroughs in AI, chips or supercomputing flow directly to the military. Under Xi, the People’s Liberation Army has transformed into a sophisticated force capable of operating well beyond China’s borders.
Soldiers march during a parade marking the 80th anniversary of WWII’s end in Tiananmen Square on September 3.Credit: Getty Images
Still, this plan faces challenges – and not just from Washington. The Chinese leader’s sweeping anti-corruption campaign and purges have hollowed out the ranks of the party’s inner circle and the military. Only 168 of the 205 Central Committee members showed up at the plenum, the lowest attendance for the session since the Cultural Revolution, on Bloomberg’s tally.
There’s no sign that Xi’s power is slipping. The party reaffirmed its call to “unite more closely around the Central Committee with Comrade Xi Jinping at its core”, reflecting the leader’s continued dominance. But his legitimacy lies in being able to deliver continued economic prosperity to his citizens, and Trump’s trade war is making that difficult.
