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China’s Economic Self-Harm

China’s antagonistic response to concerns over the use of forced labor in Xinjiang suggests that its leaders believe that the Chinese market is simply too lucrative for Western firms or governments to abandon. They may be overplaying their hand.

CLAREMONT, CALIFORNIA – Early last month, China’s rubber-stamp legislature, the National People’s Congress, officially approved the country’s 14th Five-Year Plan. The strategy was supposed to demonstrate that China has a long-term economic vision that will enable it to thrive, despite the country’s geopolitical contest with the United States. But before the ink on the NPC’s stamp could dry, China had already begun sabotaging the plan’s chances of success.

The 14th Five-Year Plan’s centerpiece is the “dual-circulation” strategy, according to which China will aim to foster growth based on domestic demand and technological self-sufficiency. This will not only reduce China’s reliance on external demand; it will also increase the reliance of its major trading partners – except the US – on access to its market and increasingly high-tech manufactures.

China has been laying the groundwork for this strategy for a while. Notably, at the end of last year, President Xi Jinping concluded the Comprehensive Agreement on Investment (CAI) with the European Union. He had to make some concessions to get there, but it was worth it: the deal had the potential not only to deepen EU-China ties, but also to drive a wedge between Europe and the US.

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