18 The Economist May 28th 2022
BriefingChina’s place in the world economy
I
n a messageto Chinese aerospace engi
neers and researchers for “Youth Day”
earlier this month, President Xi Jinping
shared his ambitions for the industry.
Young workers should advance the cause
of Chinese selfreliance, he said, following
in the footsteps of their predecessors who
developed a homegrown nuclear weapon,
missile and satellite, with little help from
outsiders, in a campaign in the era of Mao
Zedong called “Two bombs, one satellite”.
On the face of things, this is an odd
message to trumpet in the country that has
benefited more than any other from the
most recent wave of globalisation. In
China was the biggest merchandise trading
partner of only a tiny number of countries.
Now it is the biggest partner of more than60. Between 1985 and 2015 Chinese exports
of goods to America rose by a factor of 125.
Partly as a result of the associated manu
facturing boom, growth in China’s gdpper
person averaged more than 8% a year from
2001 to 2020.
But the Chinese government has never
been completely comfortable with globali
sation, whatever the benefits. The process
of “reform and opening up” started by
Deng Xiaoping in the 1970s, under which
China liberalised production and trade,
has always been piecemeal and partial. The
Communist Party does not intend to relin
quish a commanding role in the economy.
It worries about the infiltration of Western
ideas. Foreign capital and expertise have
therefore been courted and rewarded, but
also circumscribed and often resented.
Mr Xi’s calls for selfreliance reflect his
view that the balance of globalisation’s
risks and rewards has changed. He believes
that China has become too dependent on
liberal democracies, including Europe and
Japan but especially America. One risk is
that the West might experience another
economic slowdown similar to the finan
cial crisis of 200709, sapping demand for
Chinese goods and services. Another,
made much more vivid by the sanctions
imposed on Russia after its invasion of Uk
raine, is that Western countries might use
their economic power to weaken China.
To ward off such perils, Mr Xi wants to
change China’s place in the world econ
omy. To oversimplify a little, there are twointerrelated elements to what Mr Xi terms
”becoming strong”. The first is to build a
commanding position in industries the
government considers strategic—tech and
energy, for the most part—so that no one
can thwart China’s economic rise. China
knows that its crucial role in global supply
chains helps keep its autocratic system
safe from foreign attacks. The second ob
jective is for China to rely less on potential
ly hostile Western partners for trade and fi
nance, and to develop new and better ones
closer to home. The Belt and Road Initia
tive, a huge global infrastructure develop
ment strategy, is just one method by which
China hopes to find new economic friends.Make, don’t buy
China has had some success with the stra
tegic industries. Research published by
Goldman Sachs in 2020 found that China’s
selfsufficiency in hightech products was
broadly improving (see chart 1, on next
page). In many industries domestic pro
duction has caught up with domestic de
mand, meaning that China needs fewer
products from abroad. Indeed, after hitting
an alltime high in 200406, China’s im
ports of goods and services have fallen
sharply relative to its gdp(see chart 2).
In few industries has the push for self
sufficiency borne more fruit than in solar
energy. China accounts for over 70% of the
production of the raw materials used to
manufacture solar cells, but also the cells
themselves, and the modules into which
they are assembled. Dan Wang, an analystS INGAPORE
China’s effort to protect its economy from Western pressure is not going wellFortified but not enriched