Executive summary

Planning for dominance

President Xi Jinping is driving a multi-dimensional strategy to lift China to global dominance. This strategy integrates aggressive diplomacy, asymmetrical economic agreements, technological innovation, as well as escalating military expenditures. Much of the architecture for Chinese ascendency is already in place; other elements are emerging. China’s rise reinforces the domestic rule of the Chinese Communist Party (CCP), and in the country’s leaders’ eyes restores China to its historic status as the Middle Kingdom.

Under former leader Deng Xiaoping, China developed an authoritarian capitalist economic model which generated a sustained level of high GDP growth. The economy was dynamic, but also marred by flawed credit institutions, suboptimal state-owned enterprises, and a high vulnerability to corruption. These internal weaknesses are the subject of continuing reform efforts. The anti-corruption campaign has been a special focus for Xi Jinping and an element of his increased personal control of the CCP.

The artful partner

China has implemented external trade strategies to drive economic performance.

• The country’s market potential and its low-cost but skilled labour force have lured companies in advanced economies to invest in China. Once committed to China, companies have been compelled to enter into joint ventures with Chinese partners. Many find that they have lost control of the company, and their intellectual property, and have been displaced by that partner from markets inside and outside China.
• China has used its tremendous potential as an import market to negotiate asymmetrical trade arrangements with developed countries. It insists on investment rights in the partner country that are not available for that partner in China.
• For developing countries, Beijing has designed and financed the Belt and Road Initiative, situating China at the centre of six economic corridors, pulling in raw materials and exporting manufactured goods. The BRI has channelled China’s wealth into the construction of roads, railways, ports and fibre optic networks, ultimately incorporating countries containing two-thirds of the global population.
• China has established the Cross-Border Interbank Payment System to promote its currency, the renminbi, and decrease the dominance of the US dollar in international commercial exchanges.

The interfering partner

Trading partners have quickly found that China uses its commercial status and influence networks to advance regime goals.

• Whether a Chinese partner company is a state-owned enterprise or a private one, it will have close and increasingly explicit ties to the CCP.
• Unless trade agreements are carefully vetted for national security implications, Beijing will use its commercial position to gain access to businesses, technologies and infrastructure that can be exploited for intelligence objectives, or to potentially compromise a partner’s security.
• China is prepared to use threats and enticements to bring business and political elites to its side, and motivate them to defend the Chinese perspective on disputes such as the status of Taiwan and the South China Sea.
• Beijing works actively to influence ethnic Chinese groups, Chinese students and ethnic Chinese businesses in other countries, often curtailing their freedom of expression to promote a narrative favourable to its views. It has also often purchased control of local Chinese-language news outlets.
• Academics and reporters who question Chinese activities are harassed by Chinese diplomats and Chinese-controlled media.

Reinforcing Party rule

Pressure on trading partners to refrain from criticism of China is matched by an intensive effort within China to reinforce the control of the CCP.

• Government structures in China are subordinate to the Party. Government officials are often isolated in departmental silos, and have less knowledge of overall direction than the cadres of the CCP.
• Government data collection within the country is extensive and invasive. It constitutes a low-cost tool for asserting social control over the population through detailed knowledge of collective and individual activities.
• The increasing availability of detailed data from overseas economic interactions means China is also knowledgeable about individuals entering China; its plans to establish data centres and servers in BRI countries will give the CCP further influence.
• China’s new intelligence law specifies that it is the duty of all Chinese citizens to uphold the rule of the CCP, and to volunteer information on anything which may threaten that rule.
• Chinese citizens have some access to international Internet sites, but the government has been successful in denying them information on contentious events.
• The CCP still has strong legitimacy in China, but interest in Marxist theory and attendance at study sessions seem to decline with an individual’s rising economic status. Business elite interest is mixed and pragmatic, while peasants appear largely indifferent to official ideology.

China and the international order

China’s economic influence is reflected in its foreign policy and defence initiatives. It is persistent in disputing the global rules put in place by powers it perceives as in decline.

• China is both a trading partner of the United States and a strategic rival. Beijing does not seek at present to displace Washington in the role of global police, but watches attentively as an overstretched US struggles to maintain its influence.
• China’s military has increased steadily in size and capability. It regularly contributes to peace-keeping missions, but it does so more to acquire operational experience than to achieve humanitarian objectives. It also needs further professionalisation, better-educated soldiers, and stronger leadership.
• China’s military is investing significantly in technology, innovating to rival the US in the military application of artificial intelligence, unmanned weapons systems, quantum computing, and directed-energy weapons.

Outlook

China has already made substantial progress in re-ordering global supply chains. It has recognised the weaknesses in its domestic economic base and appears determined to remedy them. Xi Jinping has increased the reach of the CCP over the lives of citizens, and is targeting the Chinese diaspora as a means of increasing international influence. Diminished contact between Chinese citizens and foreign researchers has rendered the intricacies of Chinese politics even more opaque.

China’s growing influence is a delicate puzzle for the international community, which must welcome a transformed power without acquiescing in the destruction of the global diplomatic infrastructure. China’s aggressive diplomacy and insistence on asymmetrical trade are particularly challenging for countries like Canada which seek mutually positive trade relationships.

Beijing still faces considerable hurdles. With the abolition of the two-term limit on the presidency, Xi Jinping will guide China for the foreseeable future. Authoritarian rule facilitates determined action, but this can translate into decreased sensitivity to criticism, vulnerability to corruption, and a restricted flow of information vital to sound decision-making. The inter-mingling of private and public economic enterprises has led to inefficiency and corruption that persist. One of many fluctuating variables defining the new global system, China’s continued rise is not inevitable and may yet elicit international action both to contain and accommodate its ambitions. For now, its dominance strategy appears relentless and irresistible.