Quest for global leadership: Part – I

With a nearly one-third contribution to global economic growth, China is positioning itself as a key player in reshaping the international landscape. Beijing asserts that it has played a pivotal role in lifting not only its own economy but also those of other nations, by implementing projects that stimulate growth and create economic opportunities for developing countries.

Following the launch of the Belt and Road Initiative, a $900 billion venture involving investment projects across more than 50 countries, the world’s second-largest economy is now planning new commitments to drive substantial investments in AI, industrial capacity, and digital collaboration centres.

Beijing believes that these commitments will encourage other states to pursue collaboration with it. Institutionally, China has established innovative multilateral organisations such as the Asian Infrastructure Investment Bank and the New Development Bank, addressing global infrastructure needs while promoting economic equity. These initiatives are likely to capture the interest of the Global South, which is increasingly wary of the dominance of global monetary institutions that impose stringent conditions on loans to developing countries, often to safeguard the interests of Western capitalist nations.

On the economic front, China is not violating the principles of a free market economy; rather, it is employing them in a way that strongly protects its financial and commercial interests while also creating economic opportunities for Western countries. This approach encourages Western capitalist businesses to invest in China, despite the efforts of their governments to politically isolate the country. China’s strategic use of free-market principles appears to be effective, as it continues to attract foreign investments despite the criticism from Western media regarding subsidies that Beijing provides to its domestic companies.

Last year, 53,766 new foreign-invested enterprises were established in China, marking a 39.7 per cent increase year-on-year, with actual foreign investment in high-tech manufacturing growing by 6.5 percent, according to data from the Chinese Ministry of Commerce. This trend indicates that Beijing aims to channel foreign investment into higher value-added sectors. According to China Daily, “This shift has made multinational enterprises’ executives visiting China more interested in the country. Apple has announced plans to set up new R&D centres in Shenzhen and Shanghai, AstraZeneca intends to establish an advanced drug manufacturing unit, and several major global automakers have announced plans to create R&D hubs in China.” It is anticipated that foreign capital will bring advanced technologies that, in collaboration with Chinese companies, will enhance efficiency, reduce costs, and increase the potential for new patents and technology transfers.

China Daily noted that in September, China introduced a new “negative list”, removing all restrictions on foreign companies entering the manufacturing sector. “In the auto industry, 2020 saw the removal of equity caps on foreign commercial vehicle manufacturers, and 2022 witnessed similar restrictions lifted for passenger vehicle makers. Additionally, foreign enterprises can now establish more than two joint ventures in China. These moves demonstrate China’s commitment to open collaboration, which – given its vast market and comprehensive industry chain – will attract high-level foreign partners across the value chain, facilitating global resource integration.”

China’s expanded and high-quality opening up in the service sector is expected to create a substantial market and development opportunities for global service trade enterprises. China Daily reports that the high potential of the services sector is evident from the fact that, in the first eight months of this year, China’s foreign trade in services reached 4.89 trillion yuan ($686.44 billion), reflecting a 14.3 per cent year-on-year increase.

In trade disputes, Beijing is also adhering to mechanisms established by the global capitalist order. Rather than engaging in direct confrontations with capitalist countries, it brings contentious trade decisions by Western governments to the very platforms the Free World established after World War II. For instance, China filed a lawsuit at the WTO against the EU’s final ruling on the anti-subsidy case targeting Chinese electric vehicles (EVs), invoking the dispute settlement mechanism to protect the development of its EV industry and to promote global cooperation on green transformation.

Despite being a communist country, Beijing appears committed to following free-market principles and respecting the frameworks laid out by the rules-based world order. This is not the first time Beijing has turned to the global trade body; it previously challenged the EU’s preliminary anti-subsidy measures against China-made EVs as well.

China is using free-market logic to counter Western countries on this front. A spokesperson for the Chinese Ministry of Commerce commented on the EU’s stance, stating, “The EU’s final ruling lacks a factual and legal basis, which violates WTO rules and constitutes an abuse of trade remedy measures. This is trade protectionism under the guise of imposing countervailing duties.” The Ministry of Commerce urged the EU to reconsider its actions, promptly correct its non-compliant practices, and work jointly to safeguard the stability of the global EV industry and supply chain, as well as the broader economic and trade cooperation between China and the EU.

Critics argue that, despite the European Union’s repeated anti-China measures, Beijing has approached the situation with patience. Chinese officials believe the bloc should adopt a pragmatic perspective rather than a one-sided view. They contend that instead of interpreting issues in China-Europe relations through the framework of the comprehensive strategic partnership, the European Commission (EC) has taken a shortsighted approach and engaged in excessive behaviour. It is believed that China and the EU have developed a community of intertwined interests over years of collaboration, and any tit-for-tat actions would inflict considerable damage on both sides.

However, Western analysts allege that China heavily subsidises companies that should be competing with Western businesses independent of state support. Analysts Frank Bickenbach, Dirk Dohse, Rolf J Langhammer, and Wan-Hsin Liu of the Kiel Institute for the World Economy in Germany argue that China relies extensively on subsidies to lead in global green-tech markets, including battery electric vehicles and wind turbines. “Extensive government support has enabled Chinese companies to scale up rapidly, dominate the Chinese market, and expand into foreign markets”, they observe.

A study by the Center for Strategic and International Studies (CSIS) estimates that public support for Chinese industry amounted to at least 221.3 billion euros, or 1.73 per cent of GDP, in 2019. It is argued that this level of support is significantly higher than that of other major economies, both in absolute terms and relative to GDP. “Relative to GDP, public support in China is about three times higher than in France (0.55%) and about four times higher than in Germany (0.41%) or the United States (0.39%).”

Critics argue that this economic dominance, in the long term, will translate into China’s political and strategic supremacy, a goal the state has pursued for years.

To be continued

The writer is a freelance

journalist who can be reached at:

egalitarianism444@gmail.com