China remains resolute in its plan for global dominance

The government has been strengthening its focus on insulating China from needing the rest of the world

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“The pursuit of greater self-reliance and strength in science and technology is indis-

pensable for securing critical technological advantages,” declared the Communist Party mouthpiece, People's Daily, in July.

Industrial policy, long derided in the West as inefficient and outdated, has been reimagined as a weapon of economic resilience and self-reliance.

The elusive consumer

Yet technology alone cannot rescue growth. The more structural challenge is tepid domestic demand. China's consumers, unlike their free-spending American counterparts, remain remarkably cautious. The pandemic's rolling lockdowns scarred household confidence, and the property slump has destroyed a key source of perceived wealth.

For all its industrial might, China's economy is largely made up of citizens who prefer to save rather than spend. Household consumption accounts for just 40% of GDP, compared with 68% in the US.

Policymakers know this imbalance cannot endure forever if China does want to break through the dreaded “middle-income trap” and become a developed economy.

The government has already introduced subsidies for families with children and incentives for consumer loans, hoping to coax families into opening their wallets. The next five-year plan might try something more systematic.