The external economic strategy of the People’s Republic of China (PRC) is multilayered and asymmetrical in what the PRC demands from other countries and what it seeks for itself. On one level, China depends on the open, rules-based global economic system embodied in the World Trade Organization (WTO)—in which member countries are required to keep their markets open—and has sought a leadership role in the WTO and other economic and technical organizations to gain influence and set rules. Beijing insists that other countries adhere to global rules and keep their markets open to China, while sustaining its own market barriers and seeking acceptance and exceptions for its industrial policies and statist economic practices.

At the same time, China is developing several alternative layers of global economic ties to advance its economic influence and reduce its vulnerabilities. These include (1) the Belt and Road Initiative, (2) a global network of “hub and spoke” PRC-centered and -controlled supply chains, and (3) emerging country groupings or blocs. China’s policies and practices are already challenging global rules and U.S. economic leadership.¹ While ties to the United States and developed countries remain important, these alternative channels could become more viable and important to China over time.

China’s Approach to Trade and Investment

China’s foreign economic policies and practices are a direct extension of domestic economic, industrial, and science and technology (S&T) development plans, which seek a central role for China in all parts of the value chain, across a wide range of strategic and emerging industries, putting China in direct competition with both developed and developing economies.² China depends on an open global economy to access a range of inputs in which it is deficient. This includes agriculture; energy; critical minerals and raw materials; strategic and advanced technologies in areas such as aerospace, semiconductors, software, and advanced medical equipment; and access to foreign intellectual property (IP), research, and talent. Beijing seeks to keep global barriers to PRC trade and investment low while sustaining barriers to its own market. Although Beijing selectively opens China’s market to obtain foreign capital, technology, and knowhow, it wields controls over this activity and restricts the extent to which foreign firms can compete in China.³ Since the late 1990s, PRC outbound investment has become increasingly important in these efforts. Foreign technology transfer through trade and investment, research ties with developed countries, and the acquisition of foreign firms in strategic areas have played key roles in advancing China’s technological capabilities. State direction, support, and market protections have allowed PRC firms to assume leading market positions domestically and overseas. PRC firms have gained control of global minerals and metals supply chains, as well as key nodes in transportation networks and digital infrastructure.

As a global manufacturing center, the export sector is central to China’s development strategy. Xi Jinping has revived a “dual circulation” policy that seeks to leverage the dual forces of domestic and global demand, or develop China’s domestic capacity while advancing in global markets.⁴ Conceptually the approach aims to boost domestic consumption, but the accompanying policies rely on industrial policies that drive supply, generate excess capacity, and depend on an export off-ramp. During the global financial crisis in 2009, Beijing adopted dual circulation to subsidize and expand production in thirteen industries while market-oriented foreign competitors contracted, generating excess capacity in sectors such as aluminum and steel. China exported this capacity and boosted its global market share.⁵ As products developed under “Made in China 2025” come to market in volumes already above what China can consume (e.g., electric vehicles), Beijing is seeking to expand these exports, advance PRC IP and technical standards that include PRC IP, and extend the extraterritorial reach of PRC laws and judicial determinations.⁶

PRC writings are often silent about how China’s market is closed in key areas and how statist economic policies benefit China at the expense of other countries and challenge an open market-based approach to trade and development. Instead, they emphasize a general concept of “opening and reform” and portray China as a proponent of free trade. They emphasize the importance of globalization to China by stressing its “inevitability” and downplay foreign concerns about PRC technology transfer tactics by touting the role technology plays in integrating countries and criticizing U.S. efforts to de-risk from China.⁷ Writings on U.S. economic countermeasures portray China as a victim and ignore the PRC policies and practices prompting such actions.⁸

PRC writings frequently argue that China does not need to open its market because it contributes to global growth and prosperity by developing its own economy.⁹ In discussing Xi’s concept of a “global community of a shared future,” PRC writings discuss China’s goal of an “open” and “inclusive” world of “common prosperity” that relies on “win-win” cooperation.¹⁰ They describe China’s Belt and Road Initiative as a “global public good” that promotes global prosperity and stability and ignore the ways in which projects benefit PRC firms and build closed networks that connect back to China.¹¹

China promotes its “right to develop” as a rhetorical device to discredit global efforts to counter its predatory economic practices.¹² PRC writings argue that China’s economic model is unique and that its statist and asymmetrical approaches are justified by China’s ideology, history, and national conditions.¹³ PRC leaders warn other countries not to “politicize trade and investment”—another rhetorical device to discredit foreign countering of PRC economic activities of concern—even though Beijing routinely politicizes foreign economic activity and uses economic coercion. PRC leaders, for example, have pressured CEOs to keep manufacturing in China or risk new restrictions on sales.¹⁴

Since the 20th Party Congress in October 2022, PRC leaders and academics have portrayed China as a “modern” socialist country—a construct that emphasizes how China is following its own development path, again creating rhetorical devices to promote PRC exceptionalism.¹⁵ Xi’s Global Development Initiative includes the “right to develop” concept and “innovation-driven development strategy,” which intellectually underpin PRC industrial polices. While PRC writings criticize other countries for pursuing self-reliance, China’s innovation strategy says that “speeding up efforts to achieve greater self-reliance and strength in science and technology is the path China must take to advance high-quality development.”¹⁶

This focus on self-reliance ignores the ways in which China attains capabilities through foreign ties and how PRC practices are driving efforts by other governments to counter and create alternatives outside China. For example, Beijing has criticized the CHIPS and Science Act of 2022 and the Inflation Reduction Act of 2022 for boosting U.S. technology and manufacturing capabilities at the expense of China. Yet PRC commentators are silent on how these efforts seek to counter China’s industrial policies.¹⁷ PRC writings claim that China is “committed to sharing its technology with worldwide partners and cooperating to improve global science and technology governance,” but Beijing is less collaborative in practice as it seeks to codify PRC IP in global technical standards.¹⁸

Challenges to the Current Global System

A top trader and investor, PRC policies and practices challenge key tenets of the global system, such as market-based open trade and investment and reciprocity, which requires WTO-members to extend commensurate market access terms. While the WTO binds countries through negotiated commitments, China is building a trading system by creating facts on the ground through projects and deals. PRC firms are developing vertically integrated networks between countries and China to fill PRC gaps and vulnerabilities, potentially at the expense of broader regional or global integration. Despite a rhetorical commitment to globalization, PRC market barriers and industrial policies are driving de-globalization trends. PRC industrial policies involve moving up the value chain and seek to reduce China’s dependence on, and eventually displace, foreign firms after securing what the country needs.¹⁹

The Belt and Road Initiative articulates Beijing’s vision for a global system under PRC leadership. It seeks economic ties that allow Beijing to secure market access for its firms overseas without having to open its market in return. Under this model, PRC firms are solidifying their domestic market position while gaining global market share. Since the launch of the initiative in 2013 under the name “One Belt, One Road,” Beijing has negotiated deal-ready state-financed and -operated projects that garner market access for PRC firms in sectors that it restricts to foreign investment (e.g., construction, engineering, transportation, communications, finance, and digital platforms), allowing PRC firms to gain a competitive position in global infrastructure.²⁰ PRC firms are also expanding in sensitive sectors (e.g., digital platforms, finance, media, health, and telecommunications), in large part by acquiring foreign firms to gain an initial market foothold.²¹

China’s approach centers on control. PRC leaders discuss technology and supply chain “chokepoints” as an offensive and defensive concept. They emphasize countering the ability of the United States and other countries to constrain China while deepening countries’ economic dependence on China.²² The powerful role of the state in China’s economy and business ecosystem gives Beijing unique agility in offering and rescinding economic access to coerce certain behaviors. Beijing, for example, directs and funds overseas investments and acquisitions of foreign firms in strategic areas to secure control over global technology and supply chains on which China depends. It was only following ChemChina’s purchase of the Switzerland-headquartered biotechnology firm Syngenta in 2017 and CITIC’s purchase of Dow’s genetically modified corn business in Brazil in 2019 that Beijing allowed imports and the domestic use of genetically modified agriculture. In similar fashion, Beijing has supported its firms to establish mining operations overseas and develop refining and processing capabilities in China to enhance control over key raw materials.²³ Relatedly, state firms’ control of China’s commodity trade gives Beijing visibility and influence on such trade.²⁴

China’s Use of Agreements, Regional Approaches, and Blocs

China has joined the Regional Comprehensive Economic Partnership (RCEP) and is seeking to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to maintain its access to markets.²⁵ China’s ambitions for liberalization remain low, however, and typically involve some tariff reductions, trade facilitation, and minimal services openings through free trade zones.²⁶ China convinces other countries to lower barriers by agreeing to commitments it may not implement. For example, since joining the WTO in December 2001, it has thwarted implementation of many service commitments by restricting licensing and setting criteria that foreign firms cannot meet. In this context, PRC academics look to the benefits for China from other countries’ market openings rather than from any opening by China.²⁷

China is using regional approaches to manage trade frictions and undertake projects that cater to foreign leaders’ interests and open markets for PRC firms. China champions itself as a leader of the developing world to sustain flexibilities this status offers China and to collaborate with developing countries and offset their concerns about PRC drivers of trade imbalances and displacement.²⁸ Groupings such as the BRICS allow China to pilot alternatives to the U.S.-led global economic system, such as promoting the use of the renminbi. PRC writings downplay the advantages for China and highlight how PRC projects address developing countries’ funding deficits and provide a “public good.”²⁹

PRC officials and academics have long pushed the concept of “multipolarity” as an inevitable trend to build a narrative that downplays U.S. global influence. In this regard, the role of Europe and ties with the European Union has been a central thrust of PRC writings and policy efforts to reduce China’s dependence on the United States.³⁰ While developed economies remain critical to China, recent PRC academic writings focus on partners in the Belt and Road Initiative and the country’s expanding “circle of friends.”³¹ PRC firms have sought advantages to challenge the United States by developing economic ties with countries in U.S. crosshairs, such as Iran and Russia, as well as with close U.S. partners, such as Saudi Arabia. Beijing, for example, has pressured U.S. allies such as South Korea not to cooperate with the U.S. government to build semiconductor supply chains outside China or restrict semiconductor technology.³² PRC diplomats have invoked Asian regionalism in an effort to disparage U.S. involvement in the region and promote the advantages of ties with China.³³ Some experts assess that in Xi’s vision of an “Asia-Pacific community with a shared future” China serves as the hub in a hub-and-spoke model of economic ties with other Asian countries.³⁴ Official PRC media reported that Xi’s speech at Asia-Pacific Economic Cooperation in November 2023 showed China’s leadership in promoting growth in Asia and criticized U.S.-led deglobalization.³⁵

Beijing also seeks to downplay its development of groupings or blocs while seeking to prevent the development of blocs that would target or exclude China. PRC writings portray the Belt and Road Initiative as “an open and inclusive process that neither targets nor excludes any party.”³⁶ PRC writings also convey a concern about how blocs could restrict China’s ability to access technology and markets and challenge its role as a global production center if manufacturing becomes more regional. They criticize other countries’ “self-interest and protectionism” in pursuing a “zero-sum game” of “absolute security” and “monopolistic advantages.”³⁷ PRC writings further argue that countries “should not draw lines based on ideology, target specific countries, or gang up to form exclusive blocs” and should “oppose any attempt to set up technological blockades, cause technological divides, or seek development decoupling.”³⁸ PRC official statements criticize a “Cold War mentality” that “deepens division and antagonism and stokes confrontation between blocs.”³⁹

Conclusion

China touts the importance of globalization and its role as a leader of globalization. In many respects, however, it is advancing a highly selective and asymmetrical version of globalization in which other countries’ openness serves China in building its “self-reliant” capabilities and sustaining its barriers. China is undermining global rules in direct and systemic ways and appears to be counting on an absence of countermeasures that could constrain its statist economic practices or deny access to global markets. While developed economies remain critical, Beijing is developing alternative economic networks across borders in both developed and developing economies. These networks provide unique opportunities and advantages for China that could become more important over time, offering a new way of structuring global trade relationships under greater PRC influence and control.

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Karen M. Sutter is a Specialist in Asian Trade and Finance at the Congressional Research Service. She previously worked at the U.S. Department of Treasury, the CIA, the U.S.-China Business Council, and the Atlantic Council, and has over 30 years of experience working on U.S.-Asia policy issues and crosscutting economic, political, technological, and national security issues in government, business, and the think tank community.

The views expressed in this essay are those of the author and do not reflect the views of Congressional Research Service or the Library of Congress.

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IMAGE CREDITS

Banner illustration by Nate Christenson ©The National Bureau of Asian Research.

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