China Defies Economic Norms, Aims to Become Self-Contained Manufacturing Powerhouse

China is charting an unconventional economic path, striving to become a sophisticated, self-contained manufacturing power despite being at a stage of development where most countries typically shift towards services. The country's top economic planner, the National Development and Reform Commission (NDRC), has outlined a plan to strengthen the real economy, promote consumption, expand investment, and stabilize foreign trade.

China's GDP grew 5.3% year-on-year in the first quarter of 2024, accelerating from the 5.2% growth in 2023. While challenges remain, such as insufficient domestic demand and weak social expectations, the NDRC has a clear plan to address them, including actions to attract and utilize foreign investment, accelerate equipment updates and trade-in of consumer goods, and enhance self-reliance in high-level technology.

Why this matters: China's unique economic trajectory and focus on becoming a self-contained manufacturing power have significant implications for global trade dynamics and the balance of economic power. As the world's largest manufacturer, China's success in this endeavor could reshape international supply chains and technological landscapes.

The government has set a GDP growth target of 5% for 2024, driven by industrial production and manufacturing investment rather than consumption. China is focusing on developing 'new productive forces' and transitioning to a tech-driven growth model, signaling its commitment to the ongoing transition despite some economic pain in parts of society.

China leads the Emerging Asia Manufacturing Index 2024, ranking first among eight emerging economies in the Asia-Pacific region. The country's manufacturing sector continues to thrive, accounting for 31.7% of its GDP in 2023. China's strategic infrastructure investments, substantial R&D expenditure, and trade integration contribute to its manufacturing prowess, though it still has room for improvement in water availability, fuel costs, and regulatory framework.

In the first quarter of 2023, China's high-tech manufacturing sector registered a growth of 7.5%, with investment in high-tech industries increasing by 11.4%. The new energy vehicles (NEVs) output saw a substantial year-on-year increase of 28.2%, reaching nearly 2.12 million units, while NEVs sales climbed 31.8% to 2.09 million units.

Despite China's manufacturing dominance, its policy agenda threatens to destabilize global economic growth and the energy transition. The country's manufacturing surplus, supported by substantial government subsidies, is flooding the global market, particularly in industries like steel, aluminum, and clean energy technologies. A global coalition is forming to address China's anti-market behavior, aiming to discourage it without resorting to unilateral retreat or retaliation.

China remains committed to upgrading its largely manufacturing-based economy through technological reforms and the development of green technologies, which are expected to generate around $1.4 trillion in annual revenues. The country is aiming to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060 as part of its efforts to transition to a greener economy.

Key Takeaways

• China aims to become a self-contained manufacturing power, defying typical development stages.
• China's GDP grew 5.3% in Q1 2024, driven by industrial production and manufacturing investment.
• China leads the Emerging Asia Manufacturing Index 2024, with manufacturing accounting for 31.7% of GDP.
• China's manufacturing surplus and subsidies threaten global economic growth and energy transition.
• China targets carbon neutrality by 2060, with green tech expected to generate $1.4 trillion annually.