China’s Economy And The World Order – OpEd

June 7, 2026 

By Simon Hutagalung

China’s economy is a global force. It is a means of projecting power, of insulating against vulnerability, of shaping global norms. It is more than a simple growth model; it is a tool of statecraft that is strengthening China’s national power and changing the international balance of power. It is a manifestation of the political authority of the Communist Party of China, of the country’s system of economic management, and of its growing engagement with the rest of the world.

At its core, China’s economic system is that of a Communist Party at the apex of power. The Party controls the strategic resources and the core sectors of the economy. The National Development and Reform Commission and the Five-Year Plans represent the focal point for economic planning and the promotion of technology, and for the integration of economic management and national security. While since the 1970s the state has been introducing market elements and has allowed foreign capital in order to foster competition, the leeway granted to markets and to foreign elements is always strictly controlled by the state and remains subordinate to the Party.

Domestically, China is operating under a so-called dual-track-structure. The energy sector, telecommunications, finance as well as the defence sector are dominated by state-owned enterprises. But there are also private companies, which drive innovation, employment and consumer spending. Yet growth by the private sector is being restricted by the state. The state-controlled banks allocate the credit within the framework of the priorities set by the government, thus fuelling local debt, property bubbles and shadow banking activities.

A reflection of these contradictions is the Party’s dual circulation strategy launched by Xi Jinping in autumn 2020. The aim is to reduce dependence on foreign markets and to promote foreign technology while at the same time strengthening domestic demand for Chinese products and services and promoting indigenous innovation. However, so far, only a limited rebalancing has taken place. In order to stimulate consumption, the government could introduce a comprehensive social security system, allow the housing market to develop more freely and grant more scope to private enterprises to grow. However, the Party would risk losing control if it were to implement these reforms.


On the international front, China seeks to extend the reach of its economic system by increasing engagement in trade and investment with countries and regions across the globe. It aims to tap into global markets for its goods and services, to attract foreign capital to fuel further growth and to develop a network of infrastructure across Asia, Africa and Europe through its New Silk Road/Belt and Road Initiative (BRI). The BRI can be seen as a key component of China’s pursuit of a greater role on the global stage. In addition to the financial advantages that the BRI could bring to countries along the routes, it also promises to open up new markets for Chinese firms, provide a destination for the surplus productive capacity that China’s state-owned enterprises have been unable to absorb within the country, and serve as a platform for China to project its hard and soft power to all corners of the globe. However, as with many countries along the routes, which are struggling with debt sustainability and the effective governance of large-scale BRI projects, resistance is also rising.

The Digital Silk Road will also help to establish China’s position in global telecommunications and information systems, through the spread of affordable and efficient telecommunications networks, as well as of surveillance systems and models of digital governance, which will allow the country to impose its own technology standards and models of political management on other parts of the world. While for developing countries the Digital Silk Road may be an attractive option due to financial benefits, for advanced countries it is perceived as a threat to their data security and as a means to gain strategic control over their key sectors. The rise of China therefore also challenges Western dominance in the sphere of 5G telecommunications and of artificial intelligence.


The global impact of China’s model of economic development is vast. China today is the world’s largest growth market, a leading manufacturer, and a major provider of financing for global infrastructure. Commodity prices are influenced by China’s demand. The country’s rise has created new challenges and sparked growing trade tensions and de-risking in developed countries. Supply chains for semiconductors and critical raw materials are being reorganised around China.

The model, however, also has several constraints. Demographic decline and its impact on productivity and fiscal sustainability will require significant adjustments. Several years of damage to the environment will require even more significant investments to reverse. The property sector has become a systemic vulnerability. Finally, export controls and investment screening measures currently in place in several countries are already restricting access to advanced technology and foreign capital for Chinese firms.

China’s economic system is a deliberate creation, a product of design and of ongoing effort. It is a system in which the state plays a commanding role, but in which markets and in some measure even private enterprise are also allowed to function. At home, the economy is shaped by strategic priorities; abroad, by a global strategy. Can China manage its vulnerabilities and sustain its system as a stabilising force in the world, or will it bring increased global tension instead?

The opinions expressed in this article are the author’s own.

References

Jain-Chandra, S., Kothari, S., Garcia-Macia, D., & Xu, Y. (2026, February 18). How China’s economy can pivot to consumption-led growth. International Monetary Fund.

Hill, F. (2026, April 3). Peril and possibility: Collapsing old order, emerging disorder, or new order? Brookings.


About Simon Hutagalung

Simon Hutagalung is a retired diplomat from the Indonesian Foreign Ministry and received his master's degree in political science and comparative politics from the City University of New York. The opinions expressed in his articles are his own.

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