China is on a confrontational course

At the 20th party congress in October 2022, the Chinese Communist Party under Xi Jinping reaffirmed that the People's Republic claims global leadership and wants to replace the US-dominated world order. The greatest strategic importance for China is the expansion of close political and economic relations with the energy and resource-rich countries of the "Global South" as a basis for supplying its own economy. These are central statements of the current study "China's global power play: How China is creating its own economic and technological hemisphere", with which the FERI Cognitive Finance Institute is continuing the series of its China analyzes with the participation of renowned China experts. "The Chinese doctrine of national size and economic self-sufficiency will significantly exacerbate the system conflict between China and the West in the next five to ten years and further drive the fragmentation of the world economy," explains Dr. Heinz-Werner Rapp, founder and director of the FERI Cognitive Finance Institute.

Growing influence in emerging markets

For a long time, China has been concentrating its foreign trade policy on the "Global South", which has been neglected by the West, and has thus created a realistic option for an "asymmetrical decoupling" from the Western economic hemisphere. “In the future, China wants to be dependent on suppliers of the US alliance system as little as possible. Conversely, the rest of the world should remain dependent on China. In the event of a conflict, Western sanctions could be in vain,” says Prof. Sebastian Heilmann, Chair of China’s Politics and Economics at the University of Trier and author of the study. China also understood early on how to diversify its raw material and energy suppliers in order to avoid dependencies. This is represented by the Chinese-Russian energy partnership, which China clearly organized for its own benefit. In many emerging countries, China is by far the most important supplier of information, telecommunications, data center and security technologies. As a result, Beijing has a dominant influence on infrastructure and business models in many countries in Asia, Africa and Latin America. In Africa in particular, China has deeply anchored its interests. "The Chinese government is investing in Africa's development potential and is counting on the continent growing into a low-cost production location and an absorbing market for Chinese products," explains Prof. Heilmann.

Conflict over Taiwan threatens to escalate

Parallel to the strategic development of an independent hemisphere, China wants to underpin the "Great Resurgence of the Chinese Nation" through "reunification" with Taiwan. Xi Jinping's undisguised threats to take the island state by force if necessary should be understood as a clear declaration of war on the USA and its allies. Should the conflict escalate militarily, massive consequences for the global economy can be expected. The economic and financial sanctions imposed on China in the event of war would affect all trading partners and lead to economic chaos. Taiwan is also the world's most important producer of high-end semiconductors, which would endanger the supply of system-relevant components in the event of a conflict. “China's drive for dominance and increasing state dirigisme increase the risks for investors. Under these circumstances, the country is clearly losing its attractiveness for global investors," says Dr. Heinz-Werner Rapp, founder and director of the FERI Cognitive Finance Institute.

The study "China's Global Powerplay: How China Creates Its Own Economic-Technological Hemisphere" is available in German as a short version in the download area of ​​this page.