CEPII, Recherche et Expertise sur l'economie mondiale
What New Era for China? The Challenges of Domestic Prosperity and International Assertiveness

Michel Aglietta
Camille Macaire

China’s 14th five-year plan introduced “dual circulation”, a structural shift from intensive capital accumulation (China as the world’s factory) to innovation-led development.
The domestic part of the strategy consists of developing the internal market, taking into account the issue of demographic transition. This offers new opportunities, with the creation of a huge consumer market. But it also calls for a thorough overhaul of safety nets, which is slow to materialize. Increasing the technological intensity of production tools, a key element of China’s domestic strategy, faces a new challenge. The United States is using the semiconductor industry as a tool in its strategy to contain China, with both civilian and military implications. Finally, the road to carbon neutrality by 2060 will be very steep, and the political commitment to achieve this goal seems too weak at this stage. China, which has become a leader in the energy transition sector, could nevertheless turn part of this challenge into an opportunity, as a new engine of growth.
The international aspect of the transformation of the growth regime consists in proposing an alternative to the system built around the Bretton Woods institutions, with China as the leader of the emerging countries. It reflects the fact that antagonism between China and the United States has hardened considerably and seems irreconcilable. This vision has been welcomed by emerging countries as a means of weakening their dependence on the United States and the dollar system, notably at the latest annual BRICS summit. But this proposal for an alternative system is hampered by tensions within the group, and more generally the absence of a common political project.
China has an ambitious roadmap. It faces major demographic, climatic and geopolitical challenges that could slow the transformation of its growth model and limit its sphere of influence on the world stage.

 Keywords : China | dual circulation | energy transition | geopolitical fragmentation | BRICS

 JEL : E61, F02, F33, F51, O53
CEPII Policy Brief
N°2023-43,  2023

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