Aaron L. Friedberg
Twenty-five years after the beginning of the first so-called China shock, when a surge in Chinese exports disrupted manufacturing and industrial sectors worldwide, Beijing has again begun to flood global markets with a wave of heavily subsidized manufactured goods and materials—including everything from metals and textiles to more cutting-edge products such as electric vehicles, lithium batteries, and semiconductors. In more economically advanced countries, this influx threatens to upend emerging technology sectors and derail post-pandemic plans to “de-risk” economies by shifting supply chains away from China. In the developing world, a new tsunami of cheap imports could disrupt plans for industrialization and modernization.
According to the theories of economics and trade that are prevalent in the West, Chinese leader Xi Jinping has little choice but to pull back: China’s economy has become dangerously imbalanced. In 2022, according to the World Bank, the country accounted for 30 percent of global manufacturing value added but only 13 percent of global consumption. But it is a mistake to presume that Xi and the Chinese Communist Party (CCP) think about the Chinese economy the same way Western economists do. The key to understanding Xi’s economic policies is to recognize that they are principally about power, not prosperity. He will almost certainly forge ahead toward concentrating the world’s industrial power within China, even at the risk of provoking a cataclysmic trade conflict with other countries.
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