The threat from China’s global trade policy
The are endless reasons for disliking China such as political authoritarianism, suppression of political dissent, no independent media, no democratic institutions, mass surveillance, internet censorship, human rights abuses, persecution of religious freedom and freedom of speech, mass detention, suppression of cultural freedoms, intellectual property theft, cyber-espionage, market manipulation, predatory lending practices, aggression against Taiwan, massive carbon footprint, ecological damage and the list can go on and on. Despite this, many economists project China’s total nominal GDP could surpass the U.S. to become the largest economy in the world in the mid-2030s. China is already the undisputed leader in global merchandise exports, shipping over $3.5 trillion worth of goods annually. It acts as the world’s factory, exporting massive amounts of electronics, machinery, and manufactured goods. Maybe the Western countries were not that smart after all, letting in China into the global market system.
The West formally integrated China into the modern global trade system on December 11, 2001, when China officially became a member of the World Trade Organization (WTO).This milestone was the culmination of a broader opening-up process and a lengthy, 15-year negotiation period. It had been a process for China as it began reversing its isolationist policies, first implementing limited market reforms in 1978 and applying to join the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), in 1986. In 1999, the U.S. and China reached a critical bilateral trade agreement, which served as the core framework for China’s eventual admission into the WTO, then becoming the 143rd member of the WTO.
China’s trade policy has evolved from a centrally planned, closed system into the world’s most dominant trading apparatus, transitioning through phases: strict autarky (1949–1978), export-led marginal liberalization (1979–2000), aggressive WTO-accelerated global integration (2001–2017), and the modern era focusing on innovation and geoeconomic supply chain security. Recognizing the need for foreign capital and technology, China gradually decentralized trade authority, established Special Economic Zones (SEZs) along its eastern coast, and introduced the processing trade, allowing foreign firms to import components duty-free, assemble them in China, and re-export the finished products. By the 1990s, China had begun incrementally reducing tariffs and eliminating quotas, pivoting sharply toward an export-oriented model. The WTO period saw a massive influx of foreign direct investment as multinational corporations relocated their supply chains to China, transforming the country into the factory of the world. China swiftly slashed tariffs, dismantled restrictive trade barriers, and saw its exports skyrocket, particularly in the machinery, electronics, and technology sectors, propelling China to become the world’s largest goods exporter by 2010. Faced with rising geopolitical friction and vulnerabilities in global supply chains revealed during the COVID-19 pandemic, China fundamentally recalibrated its approach to international trade. Beijing shifted from passive integration to proactive geoeconomic statecraft. This prioritizes domestic self-reliance and internal consumption while maintaining targeted engagement with the global economy. Shifting from low-end assembly to advanced manufacturing and capital-intensive industries such as EVs, green energy, and semiconductors. Leveraging its dominance in supply chains, China has increasingly formalized export controls and restrictions on critical materials like rare earth elements and gallium as tools of geopolitical leverage. China is also diversifying away from traditional Western markets by heavily promoting the Belt and Road Initiative and cementing regional trade agreements like the Regional Comprehensive Economic Partnership (RCEP), making China the primary trading partner for over 120 countries.
As Western production is struggling with mass lay-offs, unemployment and affordability, China can indeed be seen as a threat to the global trade order and in particular to Western countries. Some of the main concerns are the Chinese government provides extensive financial support to key industries such as electric vehicles, solar panels, batteries, shipbuilding, and steel, China has built enormous manufacturing capacity in sectors like steel, aluminum, solar panels, and electric vehicles. Excess production is often exported, driving down global prices and putting pressure on manufacturers in other countries. For years, Western governments and companies have accused China of weak enforcement of intellectual property rights. Some firms have also alleged pressure to transfer technology in exchange for market access, although China’s policies have evolved over time.
Many large Chinese companies are state-owned or receive significant government support. Critics argue these firms do not compete under the same market incentives as private companies, creating an uneven playing field. Foreign companies often face restrictions or regulatory hurdles in China that Chinese companies do not face abroad. This lack of reciprocity has been a longstanding complaint of businesses in the United States, Europe, and Japan. China is the world’s largest manufacturer and a dominant supplier of many critical products, including rare earth elements, pharmaceutical ingredients, electronics, batteries and solar panels and many countries worry that this dependence creates strategic vulnerabilities during geopolitical tensions. Some countries argue China has used trade restrictions to exert political pressure. China challenges the existing global trade order because its extensive use of state support, industrial policy, and market restrictions can distort competition.
China has been significantly more successful than the Soviet Union as they initiated market-oriented economic reforms, continued political stability under one-party rule, integrated into global trade, focused on export-led industrialization, gradually moves rather than abrupt restructuring, lower defense burdens during its key growth decades, favorable demographics and a relentless focus on technology. The real threat is based on technology and this is also the source of China’s success. They are surveilling their own people to keep control domestically and they are using technology to expand export. The Soviet Union and Russia never realized that technology is the basis for development and this can be seen in Ukraine and in the struggling Russian economy. It is important for the West to keep this in mind and the main driver behind the U.S. economy is the continued expansion of technology solutions and they are aware of this fact and at least the U.S. is still ahead of technology and innovation but China is catching up there as well.