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The Economic Chess Game: Is China’s Security Fixation a Growth Obstacle?

According to Minxin Pei, a professor at Claremont McKenna College, President Xi Jinping’s heavy emphasis on national security could impede China’s economic growth and stifle its ambitions to catch up with the U.S. economy. President Joe Biden, too, is prioritizing national security, but China might find itself bearing the brunt of this economic standoff.

This discussion follows in the wake of recent developments such as China’s prohibition on U.S. semiconductor producer Micron and the US Inflation Reduction Act’s push to exclude certain Chinese green energy products. Xi Jinping seems to recognize that losing access to U.S. technology and markets could be a drag on China’s growth but is seemingly betting on parallel detriment to U.S. growth.

Despite these adversities, China’s growth rate is still forecasted to outstrip that of the U.S., fueling hopes that the world’s second-largest economy will eventually draw level with its American counterpart. However, the odds might not be in China’s favor, according to Pei. The implications of a security-centered growth strategy could, in fact, be more detrimental for China than the U.S., he anticipates.

Pei also points out that previous expectations for a robust Chinese post-pandemic bounce back seem to have been overly optimistic, as signs of weakening demand and manufacturing output emerge. Private investment growth in the country, reflecting investor concerns about Beijing’s prioritization of security over the economy, has been tepid, with a mere 0.4% increase recorded in 2023.

Xi’s relentless focus on security, Pei asserts, could also create a challenging environment for foreign firms operating in China. With companies under scrutiny for potential security regulation violations and an updated espionage law ramping up the stakes, the business landscape in China could become increasingly daunting.

Pei concludes that China’s efforts to bolster its economic defenses may end up being more expensive than their U.S. counterparts, with China taking the harder hit. This could, in turn, curb China’s growth potential and hinder its quest to rival the U.S.

In the economic standoff, both Beijing and Washington seem confident that they can emerge victorious. However, in this game of economic endurance, Pei suggests that China might be the one to blink first.