Global Ambition: China's Strategy to Contend for World Dominance
In the global economic landscape, China continues to hold a significant position, but questions persist about the reliability of its economic data and the sustainability of its growth. Some analysts suggest that the figures may overstate actual growth, casting a shadow over China's economic prowess.
One area of concern is the limited room for market-driven innovation in China's AI efforts. The role of markets takes a back seat to state security, limiting the potential for breakthroughs that could propel China to the forefront of AI technology.
Domestic consumption remains a challenge, despite government efforts to boost demand. Structural reforms that could securely and sustainably increase consumption have yet to materialise, leaving the economy reliant on manufacturing and exports.
Trade tensions with global partners, such as the U.S. and the European Union, are intensifying under the administration of President Donald Trump. These tensions, particularly the ongoing trade war with the U.S., have put a strain on China's economy and its relations with its global partners.
In 2024, China installed a new government as part of its regular political cycle. Under Xi Jinping's leadership, the country has emphasised opposition to hegemony, promoted multilateralism distinct from US dominance, expanded military capabilities, and advanced strategic cooperation with countries like India. China has also been developing alternatives to US dollar-centric financial systems.
Despite the challenges, the most likely scenario for the next few years is that China will maintain its position as a strong global number two behind the U.S. However, the middle class in China bears the brunt of the manufacturing-focused strategy, with weak consumption and real estate woes destroying asset values and dampening economic prospects.
Beijing aims for Chinese AI investments to break even in 2028 and achieve a return on invested capital of over 5 percent by 2030. China's comprehensive supply chain gives it a significant edge in lowering production costs for humanoid robots, a key area of AI investment.
In a less likely, but not impossible, scenario, China could stumble upon itself. If the Chinese Communist Party (CCP) attempts to further tighten its grip, fearing a loss of control over the country, China could revert to its stagnation and decline seen in 2020-2022.
The record trade surplus that China enjoys is also triggering pushback from global partners, such as the U.S. and the European Union. The ongoing trade tensions and the pushback from global partners could pose significant challenges to China's economic growth in the coming years.
