In just a few decades, China has become a serious competitor on the global technology stage. It has shed its historical identity as just a center of low-wage manufacturing. Today, the nation finds itself in a strong position with its leadership in technologies and supply chains. Today, it is at the cutting edge of innovations more essential than ever to the global energy transition. This shift has far-reaching ramifications for China’s economic landscape. It informs its geopolitical calculations, particularly during this current trade war with the United States.
Back in the 1990s, the world largely viewed China as only the “world’s factory.” It had the benefit of low labor cost and little value added. However, this perception has dramatically changed. Now, China is again out front in advanced technologies that are key to unlocking clean, sustainable energy solutions. In addition, its proponents note its superiority in mid-range technology and defense capabilities. This change is at the heart of China’s goal to be a dominant global player by 2049 in influence and economic might.
The ongoing trade war with the United States makes this a double-edged sword for Chinese President Xi Jinping. The economic fallout would be disastrous, particularly with China’s economy finally starting to crack under the pressure of a collapsing property sector and industrial production running ahead of domestic consumption. The ideological and political benefits of this culture war may prove more significant than the financial costs. Trade hostilities present Xi with an opportunity to stoke nationalistic sentiments among the populace. He deftly plays on the well-established narrative of the “century of humiliation,” which has become a fundamental element of the Chinese Communist Party’s narrative since 1989.
Referencing the “century of humiliation,” this painful moment in China’s history. It covers the period from the first Opium War of the mid-19th century through 1949, when foreign, imperial powers imposed unequal treaties on China. This historical trauma is at the base of current day Chinese nationalism, representing a period in which China was colonized and exploited. The legacy of this golden age, however, was a crumbling imperial dynasty that fell under increasing numbers of foreign invaders, most notably was Japan.
In recent years, Xi’s administration has been on the frontlines of advancing this narrative. Their objective is to create pride and toughness in their people with an intense sense of nationalism. Chinese citizens resonate strongly with the portrayal of the trade war as a battle against outside invaders. This relationship is based on their understanding of the country’s chaotic history. London-based writer and broadcaster Isabel Hilton is a long-time China hand, having reported from the country for decades. As she prophetically counsels us, “stayin in the fight till da end.” This feeling very much sums up the resolve inside China not to bow to foreign pressure while pursuing their own economic, technological, and military self-sufficiency.
For all these ideological pluses, China’s economy is crumbling under a variety of challenges. The implosion of its real estate bubble has sent subnational provincial authorities into a death spiral of enormous liabilities and vanishing income. That financial squeeze exacerbates the deepening crisis of capital overaccumulation that’s left industry awash in redundant productive capacity. Factories are producing more than the American market will bear. In response to these economic difficulties, the Chinese government has encouraged increased domestic spending for over a decade as a means to counteract industrial overproduction and stabilize growth.
China is in a frenzied pursuit of technological leadership. Its leadership seems to be well in tune with the opportunities arising from the current struggle for global hegemony. The country’s tremendous technological progress not only puts the country’s economic growth on an optimistic trajectory, but increases its positive influence in the geopolitical sphere. By investing heavily in research and development across various sectors, China aims to solidify its role as a leader in innovation on the world stage.