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Xi Jinping is quietly sanction-proofing China

Xi Jinping is betting on industry. Credit: Getty

April 22, 2024 - 2:30pm

China is doubling down on manufacturing exports to offset the challenges posed by a sluggish property market and meet the party’s 5% GDP growth target for 2024. Despite the threat of tariffs, Xi Jinping is confident that industrial might remains China’s main geopolitical advantage against the West. By centring Beijing at the core of all (or most) global supply chains, the Chinese leader believes that this might be a much better insurance against sanctions.

While the West is suffering from inflation, China is facing a decrease in the prices of consumer goods at home due to its low domestic demand. Xi refuses to implement a stimulus to boost domestic consumption while committing further to supporting the expansion of advanced industrial sectors such as batteries, semiconductors, solar panels, electric vehicles or drones. Without stimulating internal demand, that means that Chinese industries will need global markets to absorb their growing supply of products.

In terms of GDP growth, the gamble might work, at least for the present year. According to official data, in the first three months of 2024 China’s exports rose 7.1%, and its economy grew by 1.6% over the previous quarter, with projected annual growth of approximately 6.6%. That GDP growth projection might be too ambitious, given that the data for March showed an export slowdown in comparison with the same month in 2023. There is, indeed, the question of how long global markets will be able to absorb Chinese exports, as there are already thousands of Chinese EVs currently piling up in European ports. But Beijing seems confident that global demand for Chinese goods will remain robust for the rest of the year.

In recent years, Xi has pursued an economic policy to make China more self-reliant. In the past, that was interpreted as moving towards a model more dependent on domestic demand instead of exports. The rationality behind that is that if China becomes more reliant on domestic consumption, Beijing will limit its exposure to Western pressures. China’s domestic market, however, is not mature enough to become the country’s growth motor — especially after the impact of the pandemic and the need to transition away from overreliance on the real estate sector.

Xi knows that industrial capacity is China’s main competitive advantage against the West. And to keep China’s technological and industrial development, he still needs global markets. Nevertheless, China’s supremacy in manufacturing supply chains can still bring about a sanctions-proof economy.

Competitors aren’t happy with cheap Chinese advanced manufacturing flooding global markets, and Chinese products might face increasing tariffs from the US, the EU, and even from friendly nations such as Brazil. However, the impact of protectionist measures will take time to have an effect, and the specific content of new regulations might not match the words that make it into the headlines.

Despite the geopolitical risks, advanced Chinese manufacturers are much more competitive than existing alternatives. To achieve the ambitious goals of the green transition, a realistic substitute for Chinese suppliers just doesn’t exist. Reshoring production to Europe or America is a much more costly option and, especially in Europe, the sector will have a hard time staying afloat. For example, despite pledging to help a struggling European solar sector that is already suffering layoffs, the EU has backed down on imposing tariffs on Chinese solar panels.

Xi’s renewed pro-industrial strategy will make China’s economic growth and technological development much more dependent on foreign markets, but at the same time it makes the world much more dependent on China. In that scenario, for the West, it is far more difficult to apply a regime of sanctions similar to the one imposed on Russia after its invasion of Ukraine. Despite the rhetoric about decoupling, the reality is that for the time being, any abrupt economic warfare against China will still lead to mutually assured economic destruction.


Miquel Vila is a political consultant specialising in international affairs. He is also the executive director of the Catalonia Global Institute.

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Thomas K.
Thomas K.
26 days ago

There can be no compromise with communists. Not because we don’t value a compromise, but because they reject the very notion of such a thing existing. Regardless of if they’re ‘true’ socialists or the ‘national’ socialist kind, they still view the world through the lens of Marxist class conflict. It is baked into the bedrock of their ideology; everything is a zero-sum game, coexistence between the bourgeois (us) and the proletariat (them) is impossible. Any tool necessary to resolve this conflict is justified, in their view. Economic, political, and cultural subversion are particularly useful.

We have to reject such binary thinking, and remain firm in our commitment to our own beliefs while doing everything we can to, at the very least, keep them at arm’s length if not further.

Billy Bob
Billy Bob
26 days ago
Reply to  Thomas K.

I don’t believe there’s anything Communist/Marxist about China anymore, I don’t think they follow any particular ideology. They’re simply a powerful country who will attempt to use every trick in the book, fair means or foul to try and get one over their competitors, as well as being an incredibly authoritarian regime at home that compels its citizens to do its bidding.
Until the west realises that while China is playing by a completely different set of rules (if any at all) and responds in kind then China is going to keep winning

Jim Veenbaas
Jim Veenbaas
26 days ago
Reply to  Billy Bob

Agreed. If anything, it’s a fac!st state, merging corporate and govt interests. Really though, it’s simply another run of the mill autocracy.

Billy Bob
Billy Bob
26 days ago
Reply to  Jim Veenbaas

A very good point, and one I hadn’t really thought of before. It’s much more Mussolini than Mao these days

Steve Jolly
Steve Jolly
26 days ago
Reply to  Billy Bob

China abandoned the letter of the law when it comes to communism before Mao’s corpse was even cold. From his death since, China has grown less and less communist. They have profits, losses, wealth, luxury, and all the other trappings of capitalist society. They have private ownership and private wealth. All of it though, is subordinated to the interests of the government. The corporations, the private wealth, all of it, exists at the pleasure and discretion of the CCP. The government has the power to take it and use it however they please. If they want the factories to build solar panels, then they build solar panels. If they want to flood the global market with cheap goods to establish monopolies, that’s what happens.
It’s an all of society approach that harnesses all productivity, all wealth, all assets, and all efforts towards serving the interests of the state, and that’s not communism or socialism. It’s fascism. China is a good deal closer to Nazi Germany than Stalinist Russia these days, and that’s something we should all consider. Defeating the Nazi war machine required the US and UK to, for a short while, take a very similar all of society approach to match strength for strength. I certainly hope it doesn’t come to that, but it may, and like Hitler, Xi may not give us much choice but to fight. Even if we can avoid a shooting war, I’ve a feeling we’re going to have to pay the piper one way or the other. The sooner we ween ourselves off the Chinese, the better off we’ll all be. It’s not about economics anymore.

Thomas K.
Thomas K.
26 days ago
Reply to  Billy Bob

Regardless, they still view it as a zero-sum game. We must lose because we’re us and not them. They’re obviously not traditional Marxists anymore, but more along the lines of fascists in the ‘national socialist’ sense. Which is itself an offshoot of Marxism; they still view things in a us-vs-them conflict, but have swapped out ‘proletariat’ for ‘Chinese’ and ‘bourgeois’ with ‘Westerner/not-Chinese’.

Michael Cazaly
Michael Cazaly
26 days ago
Reply to  Thomas K.

Of course, the West doesn’t suppress free speech, subvert elected governments, use financial repression or support authoritarian regimes when it believes it to be in its interests…
In short, China is using the same playbook but the West cries foul when China does it…and looks like it’s winning…

Thomas K.
Thomas K.
26 days ago
Reply to  Michael Cazaly

We are nothing like them, even if we are slowly turning into something akin to them. That’s what I meant by that last paragraph. We can’t give up and become as bad as they are, but instead remain committed to what are ideals are and what they actually mean. We just need to do so with less naivety than when we thought globalization would suddenly turn the whole world into liberal democracies. If anything the reverse is happening.

Michael Cazaly
Michael Cazaly
26 days ago
Reply to  Thomas K.

But we ARE now like them…and I wish we were weren’t…
“They looked from the pigs to the men, and the men to the pigs…” Animal Farm, if memory serves…
Also I would refer you to the article about Tony Blair’s views…

Billy Bob
Billy Bob
24 days ago
Reply to  Michael Cazaly

How are we like the Chinese?

UnHerd Reader
UnHerd Reader
26 days ago

Yet another article that fails to question the “green transition”. Im sick of these consultants/researchers just going along with the nonsense. Green stuff is subsidy farming and deindustrialisation. It is almost unbelievably foolish to go along with it and yet everywhere I look it is being ramed down our throats as some kind of religious imperative that cannot be questioned. Come on unherd, get stuck in and rattle this house of cards that is the ” green transition”

P Branagan
P Branagan
25 days ago

Over the past 30+ yrs the Communist Party of China has presided over the greatest achievement in human history – the fastest improvement in human flourishing in the shortest timescale for the greatest number of people. They succeeded in moving ~800,000,000 people from dire poverty to comfortable middle class quality of life. In addition they have over 60 yrs doubled life expectancy from less than 40 yrs to 78 yrs.
China has had the highest ranking in life satisfaction of any country every year for the past 10 yrs according to the polling company IPSOS (hardly a stooge of the CPC). In January 2024 they removed China from the listings – despite having gathered the relevant data. Now I wonder why!

Ah! but what about ‘freedom and democracy’- the almighty F’nD – I here you say?

Well by any measure worth considering F’nD has nothing to do with human wellbeing. It’s a slogan that’s used by the West to bludgeon ‘inferior’ peoples into vassalage in the servitude of Big Money.

If anyone can come up with a greater achievement than that of the CPC in terms of improving human wellbeing I’m all ears.

Katalin Kish
Katalin Kish
25 days ago

“The West” is killing itself with grossly incompetent governments, destructive ideologies & soaring debt – no need for negative interference from China.
China needs stable imports of raw materials, viable markets for their goods & stability. Their strategies are long-term, aligned with their values.
“The West” would benefit from ditching its underestimation of China, Russia, etc.

Nathan Ngumi
Nathan Ngumi
24 days ago

Indeed.
China has integrated itself in the global economy to the extent that any adversarial actions by the West (say in the wake of a Chinese blockade/invasion of Taiwan) will affect both in equal measure.