In the season of China’s annual “two sessions” meetings, what remains unsaid often carries more weight than what is openly declared. When President Xi Jinping met privately with China’s top entrepreneurs in Beijing last month to offer lip service in support of the private sector, the implicit message was clear, if subtle: China’s state-dominated economic model has hit a wall.
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Premier Li Qiang’s repeated exhortation to pull out all the stops and his call for bureaucrats to be relentless problem-solvers barely mask a deeper reality. China’s bureaucratic apparatus has a follow-through problem. That’s hardly surprising, given that the anti-corruption crackdown and local debt crisis have dampened morale and tightened purse strings across the system.
These hidden signals highlight two fundamental domestic hurdles in Xi’s economic management: securing buy-in from both the private sector and bureaucrats tasked with implementing policy. No matter how powerful Xi might be, he cannot steer China’s economic ship towards global leadership without overcoming these internal roadblocks.
Complicating matters further is a third challenge: the growing scrutiny from the United States. This marks a stark departure from the past decades, when China’s accession to the World Trade Organization reshaped global trade and positioned it as the world’s factory.
Back then, the US-China relationship was symbiotic: the US designed, China manufactured; the US innovated, China scaled. The US sat at the high end of the value chain, while China occupied the low rung. That arrangement is now history. With advanced capabilities in electric vehicles, quantum computing, semiconductors, drones and artificial intelligence, China is not a complementary player any more but a competitor.
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Xi has reason to take pride in China’s economic ascent. China constructed a robust industrial ecosystem distinct from the US model of innovation. This transformation has turned what was once a cooperative relationship into competition. China is no longer content with manufacturing prowess; it is seeking leadership in the strategic industries that will define the coming decades.