The Price of Power: China’s Self-Reliance Drive and the Fragility Beneath It

By IndraStra Global Editorial Team

Cover Image Attribute: The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China (CPC) was convened in Beijing under the chairmanship of the CPC Central Committee’s Political Bureau between October 20-23, 2025. / Source: Xinhua/CGTN

In the crisp autumn of 2025, as leaves turn in Beijing's parks, China's economic machinery hums with a familiar resolve. The recent truce between Presidents Xi Jinping and Donald Trump, sealed during their summit in South Korea last month, offers a momentary pause in the tariff skirmishes that have defined bilateral relations since April's "liberation day" levies. Yet this agreement feels tentative, like a bridge patched over a widening chasm. Exports from China dipped 1.1 percent year-on-year in October, the first decline since those initial tariffs took hold, even as shipments to the European Union edged up 0.9 percent and those to Southeast Asia climbed 11 percent. To the United States, exports plunged 25 percent, underscoring the reorientation of trade flows that has become a survival tactic. This dip arrives against a backdrop of robust earlier performance: September's exports reached $328.6 billion, the highest monthly total of the year, buoyed by a trade surplus exceeding $875 billion and marching toward a record. Such figures reveal a nation leaning heavily on its factories to offset domestic frailties, a strategy etched deep into policy since the early 2000s.
Two decades ago, when China acceded to the World Trade Organization (WTO), its manufactured goods lagged behind imports in quality, drawing companies and consumers toward foreign alternatives for cars, telecommunications gear, and power equipment. That era of dependence has receded, supplanted by a deliberate march toward autonomy. Under leaders from Hu Jintao to Xi Jinping, Beijing has funneled resources into supplanting imports with homegrown production, a pursuit that, while expensive and sometimes cumbersome, has erected barriers against external pressures. "Self-reliance has been a cornerstone of Chinese policymaking," as one analysis frames it, enabling the establishment of choke points that now press upon global supply chains. Rare-earth metals and magnets, over which China holds near-total sway, exemplify this leverage; their threatened export curbs last month compelled the Trump administration to temper new tariffs on Chinese goods, aligning them closer to rates on Southeast Asian nations than those on traditional allies like India and Brazil.
This fortification extends beyond minerals to pharmaceuticals, where China dominates the production of antibiotic ingredients, and to electrical equipment and low-end computer chips. When Washington sought to counter Beijing's rare-earth stance, it resorted to threats against remaining vital exports, such as aircraft parts, revealing the erosion of its own bargaining power. The Fourth Plenum of the Communist Party's Central Committee, convened October 20-23, crystallized this trajectory in the blueprint for the 15th Five-Year Plan, spanning 2026 to 2030. There, Xi urged intensifying "efforts toward achieving greater self-reliance and strength in science and technology," a call echoed in the plenum's communique, which vows to "consolidate and expand our advantages, break through bottlenecks and constraints and strengthen our shortcomings and weaknesses." Senior adviser Tian Peiyan elaborated in a recent journal piece that "a comprehensive industrial system benefits the enhanced resilience of supply chains," positioning such breadth as "a bulwark of economic security."
The plenum's deliberations, held just before the fifth round of U.S.-China trade consultations in Kuala Lumpur, served dual roles: sketching the five-year agenda while priming the ground for Xi's encounter with Trump. These talks extended the tariff truce past November 10, averting an immediate escalation after Beijing's rare-earth maneuvers disrupted a fragile detente. Yet the plenum's tone, with its emphasis on technological supremacy, dares further confrontation. Recommendations prioritize "high-level scientific and technological self-reliance," channeling funds into domestic firms to indigenize critical technologies, from semiconductors to quantum computing. This builds on campaigns like the post-WTO Indigenous Innovation drive, Made in China 2025, and the recent "high quality productive forces" initiative, all laced with protectionism. Tariffs and fees since 2008 have more than doubled the prices of large-engine imported vehicles, steering consumers toward electric and hybrid models that now claim over half the auto market. State banks have extended low-interest loans to electric vehicle and solar panel manufacturers, crowning China the world's top exporter in both.
Such measures have yielded tangible gains. Among 500 major industrial products, China leads global production in over 220, as former Industry and Information Technology Minister Jin Zhuanglong noted last year. The plenum document mandates accelerating "China’s strength in manufacturing, product quality, aerospace, transportation and cyberspace," blending vast manufacturing scale with state guidance. Only niches like commercial aircraft and cutting-edge semiconductors remain Western strongholds, though Chinese firms have adeptly acquired and smuggled Nvidia chips to bridge gaps. Brad Setser, a China expert at the Council on Foreign Relations, observes that "President Xi has been quite good at finding ways to engineer American imports out of China’s supply chains over time, apart from the most advanced semiconductors designed but not made by U.S. firms." This engineering has insulated Beijing from disputes, leaving the West with "dwindling leverage," as one report puts it.
Yet self-reliance exacts costs, visible in the economy's lopsided contours. Household consumption lingers at about 40 percent of gross domestic product, well below norms in advanced economies, a disparity the 15th plan addresses with scant detail. Promises to "vigorously boost consumption" and erect a "strong domestic market" trail behind industrial mandates in the communique, hinting at persistent priorities. Families grapple with the scars of COVID-19 lockdowns, a property collapse erasing trillions in wealth, and youth unemployment that peaked at 18.9 percent in August before data publication ceased. Retail sales grew just 3.5 percent in September, a slowdown from 4.1 percent, while property investment tumbled 13.9 percent year-on-year. Local governments, saddled with debt, hesitate on bold social outlays for education, health care, and security nets. The plenum nods to "promoting high-quality and full employment" and "improving the income distribution system," but these echo prior pledges, with funds flowing instead to infrastructure and exports.
This imbalance manifests in Yiwu, the eastern city anchoring the world's largest wholesale market, where vendors like Gong Hao pivot from lost American buyers of plastic leis and bunny ears to European and Southeast Asian clients. "American customers have little impact on us," Gong remarks, a sentiment shared by Fiona Zhou of Kaqu Toys, who discounted U.S. orders 5 percent during a tariff pause and now redirects rubber chickens to South Africa. Her facility in the Global Digital Trade Center, spanning hundreds of football fields, bypasses China's Great Firewall to access TikTok and YouTube, easing sales abroad. Ye Chaoli, peddling Labubu dolls and Hello Kitty gear, laments domestic woes: half her business stays home, where "business is getting worse" amid post-pandemic struggles and a property crash eroding savings. Households save at pandemic levels, prices plunge, urban wages stagnate at record lows, and land costs for local revenues crater. These pressures render exports indispensable, comprising up to one-third of growth last year, as Han Lin of the Asia Group notes: "Trade is effectively what’s keeping the lights on for China’s economy."
Premier Li Qiang, speaking at the China International Import Expo on November 5, projected the economy surpassing 170 trillion yuan ($23.87 trillion) by 2030, a "big market opportunity for the world" amid rising barriers. He decried tariffs for "seriously undermining international economic and trade rules, and also disrupting the normal operation of enterprises in various countries," calling for a "more reasonable and transparent" system, particularly for developing nations. This plea arrives as U.S. firms claim the expo's largest space for the seventh year, yet the truce—slashing some tariffs while pausing rare-earth curbs and resuming soybean buys—masks unresolved frictions. China's renminbi, weakened against many partners but bolstered last week by the central bank, plus rate cuts, cheapens exports further. Christopher Beddor of Gavekal Dragonomics explains: "As things get worse at home, their exports get more competitive." September's surge offset a 27 percent U.S. drop, but October's contraction, alongside 1 percent import growth below September's 7.4 percent, tempers optimism. Larry Hu of Macquarie anticipates "exports are... going to remain very strong in the next 6-12 months," though volatility persists.
The 15th plan's wager on self-reliance promises to extend green technology triumphs—solar, batteries, electric vehicles—to biotechnology and advanced machinery, potentially reshaping standards. Yet it risks flooding markets, with surpluses nearing $1.2 trillion this year, double 2021's. Mexico eyes 50 percent auto tariffs, India ponders anti-dumping, and Europe contends with squeezed manufacturers. Kelvin Lam of Pantheon Macroeconomics sees promise in "export orders... risen quite strongly," but Lynn Song of ING warns that "weak confidence translating to soft consumption, investment, and a worsening property price downturn still need to be addressed." The plenum's self-assessment of the prior plan lauds "enhancing technological self-reliance and strength" and a "green economy" shift, yet independent tallies deem tech progress middling, external strategy a failure amid "wolf warrior diplomacy."
Critics argue this playbook demands revision. Overproduction, deflation, local fiscal crises, and real estate woes—now in year four—demand structural shifts, not more stimulus via infrastructure borrowing. Xi's early vision of "innovation-led, high-quality growth" has yielded to security imperatives, fostering "involution competition" where dynamic tech contrasts loss-making firms and feeble spending. The People's Daily catalogs these headwinds, but solutions lag: incremental welfare trails industrial mandates. As one observer puts it, "only political leadership and reform can do that, and the party isn’t going to go there." The plenum confirms purges, like Admiral Miao Hua's ouster and investigations into figures such as Tang Renjian, signaling Xi's vigilance over loyalty, especially in the military where seven Central Committee officers have fallen since his third term.
Winners emerge in high-tech realms, from AI to rare earths, where state backing cements leadership. Traditional manufacturers gain upgrades, as Xi affirms: "The real economy cannot be lost." Losers dwell in consumer shadows, where property transactions fell 12.5 percent in September and joblessness festers among graduates. Local officials, fiscally strained, prioritize factories over public services. Internationally, developing partners like Tanzania's Rhoda Nghelembi, sourcing bangles in Yiwu and envisioning "my future growing so big and rich because of China," benefit from opportunities, yet advanced economies brace for gluts. The plan's "high-level opening-up" pledges free-trade zones and inbound investment, aligning with rules, but fortifies against reliance.
Xi's April speech framed five pillars: economic development, security, innovation systems, talent for "new quality productive forces," and livelihoods. The NPC Standing Committee echoes this, listing tech second among initiatives. Yet consumption policies—waiving preschool fees, child subsidies—pale against investment in exports and R&D. Xi has thrice declared "science and technological innovation of new productive forces as the drivers to develop China’s economy," especially amid "unpredictable" U.S. ties. This continuity, per Brookings analysis, lays groundwork for Xi's fourth term in 2027, intertwining economics with politics.

In Yiwu’s bustle, where drones hum and robot dogs await bones, the human element persists. Vendors haggle amid camping chairs and rubber-pellet AK-47s, adapting to whiplash tariffs that Ms. Zhou likens to "your friend arguing with you all the time—what can you do?" Beijing's bulwark shields against such volatility, yet it cannot fully mend internal rifts. The 15th plan, if realized, might elevate China technologically, but citizens will measure it by rising incomes and steadier lives by 2030. As exports falter for the first time in months, the question lingers: can self-reliance sustain a economy where factories roar but homes whisper caution? The truce buys time, but the path ahead demands not just fortitude, but finesse in balancing inner needs with outer ambitions. In this delicate equilibrium lies China's next chapter, one where resilience meets reality.

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