Decoding China’s Economic Challenges and Global Ambitions

Few have articulated the radical nature of China President Xi Jinping's agenda and the stakes for U.S. commerce, diplomacy, and security better than Elizabeth Economy, the Hargrove Senior Fellow at the Hoover Institution and co-chair of its Program on the US, China, and the World. ‌

In her groundbreaking work, The World According to China, Economy chronicles Beijing’s efforts not only to thrive in the rules-based order but to rework the order itself. Much of this is focused on sovereignty claims over Hong Kong, Taiwan, and elsewhere.

However, it is also centered on aligning the United Nations and other international institutions with Beijing’s own version of norms and values, which are starkly different from those in the West.

Economy joined us for this year’s final episode of The Call, which examines significant questions raised by China’s sliding economic fortunes. We discussed what the slowdown means for the global vision of paramount leader Xi and his efforts to assert Chinese centrality on the world stage.

Belt and Road Initiative

Perhaps the most consequential piece, however, is Beijing’s effort to expand its economic, political, and security interests through Xi’s signature foreign policy project, the massively ambitious Belt and Road Initiative, and its success in using infrastructure loans and investments to expand ties across virtually every region of the world.

More than 150 countries have signed up for the program, and through the Belt and Road, China has funded more than $1 trillion in ports, railways, digital infrastructure, and much more. The initiative was launched in 2013 when China was growing at 8%. Today, China’s official stats suggest growth of a little more than half that rate, and many economists say the true rate is much lower. ‌

Belt and road lending and investment are now leveling off, and questions are surfacing over China’s ability to grow the program. “In the past three years, more money of debt repayment is going from Belt and Road countries back to China than any new money from China is going to these countries,” said Daniel Rosen, co-founder of the Rhodium Group, a research firm.

Stalled Engine

China’s global ambitions, either directly or indirectly, are tied to its economic success at home. China remains one of the greatest economic powers the world has ever seen. But the growth engine has never regained the momentum lost in the pandemic and has stalled in recent months after a property market bust, a collapse in local investment, and a significant decline in demand. ‌

Stimulus measures—including rate cuts, property market measures, debt relief for local governments—have left many unimpressed. China’s growth model has encouraged savings over consumption and directed capital to strategic industries. The world is growing less accepting of the resulting overcapacity and exports. Beijing has signaled it will continue to direct efforts to tech, green, and other strategic industries. ‌

Leave aside the implications for more exports. Few see tech investments as sufficient to address fully the growing insecurity among the public at large. And while the investment-led model may have fueled China’s rise, it no longer yields the economic returns of the past. Calls are growing for more measures to boost demand through consumption, which remains well below world averages. ‌

Chinese officials have signaled more measures to come, including some designed to boost consumption, but details remain vague. “What are you doing for the Chinese consumer? What are you doing for the private economy?” asked Economy, in a recent television appearance. “These are the bigger questions that so far I think the stimulus has not answered.”

About the authors

Jay Sapsford

Jay Sapsford is Senior Vice President for Global Risk Analysis and helps lead the Chamber’s efforts in assessing geopolitical and economic risks that impact the business community. He plays a key role in identifying global trends, risks, and opportunities on behalf of the Chamber’s membership.

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