China’s Economic Policies: Driving Global Markets or Distorting Them?

China’s economic policies, intricately designed to maintain domestic growth while securing its dominance on the world stage, have become a defining force in global markets. With its rise to the position of the world’s second-largest economy, Beijing’s strategies have drawn admiration and criticism in equal measure. The question remains: are these policies catalysts for global prosperity or sources of systemic risk and market distortion?

At the heart of China’s economic framework lies its state-driven model. Unlike the free-market economies of the West, China’s government maintains a firm grip on its industrial base, banking sector, and trade practices. Policies such as subsidies to state-owned enterprises (SOEs) and heavy investments in strategic sectors, including technology and green energy, are aimed at ensuring economic stability and competitive advantage. These measures, while fuelling growth, have raised serious concerns about their impact on global competition.

One of the most contentious aspects of China’s economic policies is its trade practices. By subsidising key industries and deploying measures like export rebates, Beijing has made Chinese goods cheaper and more attractive on international markets. This strategy has enabled China to dominate sectors such as steel, solar panels, and electronics. However, it has also led to accusations of dumping, where Chinese companies export products at prices below market value, undermining competitors abroad. The result? Entire industries in countries like the United States, India, and the European Union have been disrupted, leading to job losses and calls for protective tariffs.

China’s currency management has further fuelled criticism. For years, Beijing was accused of artificially devaluing the yuan to boost exports, giving its manufacturers an unfair advantage. While the People’s Bank of China (PBOC) has taken steps toward greater currency flexibility, the yuan’s exchange rate is still far from being market-determined. This policy, critics argue, distorts global trade dynamics and exacerbates imbalances in the international monetary system.

Beijing’s approach to foreign investment is another area that has drawn scrutiny. While China aggressively pursues investments abroad, particularly under its Belt and Road Initiative (BRI), it remains relatively restrictive when it comes to allowing foreign firms to operate within its borders. Sectors like telecommunications, finance, and media are tightly controlled, with foreign companies often required to enter joint ventures with local firms, transferring technology and expertise in the process. These practices, critics contend, give Chinese firms an unfair edge while stifling genuine market competition.

The Belt and Road Initiative itself epitomises the dual-edged nature of China’s economic policies. Through the BRI, Beijing has channelled billions of dollars into infrastructure projects across Asia, Africa, and Europe, ostensibly to foster connectivity and development. Yet, the initiative has also been criticised as a vehicle for debt diplomacy. Many recipient countries have found themselves grappling with unsustainable debt burdens, raising questions about Beijing’s intentions and the long-term viability of these projects.

China’s industrial policies, particularly its Made in China 2025 plan, have also been a source of tension. The initiative, which aims to transform China into a global leader in high-tech industries, has drawn criticism for its reliance on state support and intellectual property (IP) acquisition. Western governments and businesses have accused China of engaging in forced technology transfers, cyber-espionage, and other practices to achieve its goals. These allegations have strained relations with trading partners and led to a series of trade disputes, including the US-China trade war.

Environmental concerns further complicate the narrative around China’s economic policies. While Beijing has positioned itself as a leader in renewable energy, with significant investments in solar and wind power, it remains one of the world’s largest consumers of coal and emitters of greenhouse gases. The dichotomy between its green ambitions and continued reliance on fossil fuels highlights the challenges of balancing economic growth with environmental sustainability.

China’s role in shaping global supply chains is another area that warrants critical examination. By positioning itself as the world’s manufacturing hub, China has become indispensable to global trade. However, this dominance has also exposed vulnerabilities, as evidenced by the supply chain disruptions during the COVID-19 pandemic. The crisis underscored the risks of over-reliance on Chinese production and prompted calls for diversification. Yet, shifting supply chains away from China is easier said than done, given the scale of its industrial base and the cost advantages it offers.

The ripple effects of China’s economic policies are also felt in the financial sphere. Beijing’s efforts to internationalise the yuan and establish itself as a global financial hub have gained momentum, with initiatives such as the Asian Infrastructure Investment Bank (AIIB) and the digital yuan. While these developments signal China’s aspirations to challenge the dominance of the US dollar, they also raise concerns about transparency and the potential for Beijing to exert undue influence over global financial institutions.

Critics argue that the opacity of China’s economic decision-making exacerbates these concerns. Unlike democratic systems where economic policies are subject to public scrutiny and debate, China’s policy framework is crafted behind closed doors by the Communist Party. This lack of transparency, combined with Beijing’s willingness to leverage its economic power for geopolitical ends, has fuelled apprehension about its rise.

At the same time, it is essential to acknowledge the transformative impact of China’s economic policies on global development. By lifting hundreds of millions of people out of poverty and driving economic growth in developing countries, Beijing has demonstrated the potential of state-led development models. However, the cost of this success, both domestically and internationally, raises questions about its sustainability and replicability.

The global response to China’s economic policies has been varied, reflecting the complexities of its role in the international system. While some countries have embraced Beijing’s initiatives as opportunities for growth, others have adopted more cautious or adversarial stances, seeking to counterbalance China’s influence through alliances and alternative frameworks. This dynamic underscores the centrality of China’s economic policies in shaping the geopolitical landscape of the 21st century.

As the world grapples with the implications of China’s rise, the need for a balanced and critical approach to its economic policies has never been more apparent. Whether as partners, competitors, or rivals, countries must navigate the opportunities and challenges posed by Beijing’s strategies, shaping a future where global markets remain dynamic, inclusive, and resilient.