China is devising a strategic approach for potential hostilities with the United States, potentially impacting Germany's stake in the situation.
Gearing Up for the Long Haul: China's Response to US-China Tensions
As the 90-day truce between China and the USA nears its end, Beijing is gearing up for a bumpy ride ahead. The consensus in China is that the USA's ultimate goal doesn't lie in creating fair trade conditions but in halting China's rise to economic and military superpower.
Bracing for Turbulence
The Chinese government has acknowledged the need to prepare for a prolonged standoff with the USA. In the wake of the Geneva truce, China's conviction has hardened. President Xi Jinping, in a recent economic meeting in Shanghai, emphasized the importance of technological innovation, anchoring growth in the real economy, and modernizing traditional industries.
According to analyst Matthew Johnson of the US think tank Jamestown Foundation, this shift indicates that Beijing is prioritizing long-term security interests over rapid economic growth to protect the economy from systemic risks posed by the US decoupling and domestic vulnerabilities.
Consumption-Driven Economy
China aims to become less dependent on exports to the USA by increasing domestic consumption. This strategy could potentially benefit German companies exporting to China, who have been lamenting the consumption slump in the country.
Simultaneously, China plans to make domestic companies less reliant on foreign know-how. Ideally, these companies will create affordable, high-quality products that generate global dependencies. However, this ambition poses a threat to German companies, already losing market share in China at an alarming rate.
Focus Areas: Semiconductors, AI, Energy, and Space
China has identified semiconductors, Artificial Intelligence, energy, and space as key future industries, referring to them as "new quality productivity factors" in party speak. The construction and real estate sector, which was the chief driver of China's economic growth until its collapse in 2021, no longer holds this position. Instead, technology companies driving innovation step into the forefront.
To become leading in these areas, China may sacrifice some economic growth, which has hovered around five percent per year. The leadership in Beijing aims to make the Chinese economy more resilient to external shocks rather than "outsize its geopolitical rivals through sheer economic size."
The Export Restrictions Card
China's economic tussle with the USA is ongoing, marked by export restrictions on rare earths, a resource China dominates. These restrictions have caused significant tension for European and American companies, especially in the tech sector. Although Xi Jinping promised to lessen export controls in a recent phone call with President Trump, these restrictions may be reinstated in the near future.
As China and the USA navigate their differing interests, the tactics employed by both sides will be crucial in shaping the trajectory of their conflict. China's "master plan" encompasses military deterrence, economic diversification, and technological self-sufficiency, all aimed at reducing vulnerabilities in response to potential future confrontations with the USA.
In light of the ongoing US-China tensions, China is bracing for a prolonged standoff, prioritizing long-term security interests over rapid economic growth to protect its economy from systemic risks. Domestic consumption is a key strategy to lessen dependency on exports to the US, but this could pose a threat to German companies already losing market share in China. Meanwhile, China identifies semiconductors, AI, energy, and space as future industries, aiming to reduce vulnerabilities and compete with the US on technological self-sufficiency, a move that could influence general-news and politics in the coming years.
