The Future of China’s Economic Power

EXECUTIVE SUMMARY

MAIN ARGUMENT

Both China and the U.S. seek to make their respective economies less dependent on each other. The extent to which they will be successful in doing so largely remains to be seen. At this early stage, there is some indication that China’s efforts to move toward an economic growth model driven more by domestic consumption than exports are making progress. However, whether China can sustain its economic success in the face of the numerous challenges confronting its economy remains unclear.

POLICY IMPLICATIONS

• Firms (and their microeconomic, self-interested optimization) drive much of the economic dynamics of the Asia-Pacific region. Although analysts and policymakers tend to focus on nation-states when considering the strategic implications of economics, it is more accurate to understand economic statecraft in terms of the government policies shaping the incentive structures for the commercial actors that actually conduct most economic activity.
• De-risking (rather than decoupling) is a more likely outcome for foreign firms as they reconsider their reliance on China. However, important questions remain around how the U.S. and others would implement such de-risking.
• China’s “dual circulation” and other strategic economic policies, if successful, will likely reduce its foreign economic dependence even as they foster increased foreign reliance on China. However, there remains a good deal of uncertainty surrounding China’s ability to continue its economic success as well as the viability of initiatives like Made in China 2025 in the face of concerted efforts to limit China’s access to leading-edge technology with national security implications.

William J. Norris is an Associate Professor of Chinese Foreign and Security Policy, Director of China Studies, and Director of the Economic Statecraft Program in the Bush School of Government and Public Service at Texas A&M University.