Understanding China’s policy on self-reliance  

I was born and raised in China, but have now lived over half of my life in the UK. My family remains in China. Understanding China is therefore more than an intellectual issue for me; it is personal. I have written this thought piece to share some insights into the nuances of China’s history and culture, which significantly influence its policies and public statements. I hope this blog may be helpful to others in gaining a better understanding of the complexities that shape China’s actions.  

China is facing a storm of challenges, where both domestic and global factors come together in a turbulent mix. Internally, the country is facing a slower than expected recovery from the prolonged COVID-19 restrictions with low consumer confidence1, an economy with structural problems becoming more apparent, the end of the demographic dividend2, high inequality, and other simmering social issues. Externally, tensions with the US and other Western nations, along with heightened geopolitical risks, have led investors to divest from China3, 4 and prompted corporations to shift their supply chains. The interaction of domestic and international factors creates a complicated situation for China, changes its role on the global stage, and makes investing in China an increasingly complex endeavour.  

Recently, China’s self-reliance has returned to the spotlight. Many are concerned that it might signal a shift towards stagnation by reversing the openness that has facilitated its economic progress, despite President Xi publicly stating that this is not “a closed-door policy”5. To navigate the intricate landscape of investing in China, its current stance on self-reliance can be better understood within its rich historical context.  

A journey through time 

China remained an agricultural community longer than most other countries and the concept of self-reliance emerged as the bedrock of security. In the early days of Chinese civilisation, many villages were isolated and had to be self-sufficient for survival, fostering tight-knit communities where mutual support was essential. This ingrained ethos emphasised collective effort and unity, later giving rise to one of the fundamental values in Confucianism: harmony6. Acting as a guiding principle for its rulers and citizens, this concept still heavily influences China today7, where many ordinary Chinese value the emphasis on security and stability8.  

The pursuit of self-reliance was reinforced by the nation’s turbulent history following the overthrow of the Qing dynasty. The concept of ” Zi Li Geng Sheng” (self-reliance) associated with the idea of “Zi Qiang” (self-strengthening), was a key goal of the late Qing dynasty reformers who sought to modernise China and make it less dependent on foreign powers (a response to the Opium Wars). This self-strengthening movement was ultimately unsuccessful, but had a significant impact and engraved the idea of self-reliance as a core value of Chinese nationalism9.  

Back in the spotlight 

In recent years, with the escalation of the US-China trade war, heightened technology competition, and increased geopolitical tensions, the concept of self-reliance has featured in President Xi Jinping’s many communications including the 20th Party Congress10. As a response to growing uncertainties on the global stage, President Xi has emphasised the importance of self-reliance in a number of key sectors, including food, energy and technology.  

The Chinese government has been implementing policies to promote self-reliance, often involving heavy subsidies to domestic companies and substantial state investment in key research and development sectors. Policies have also been set with a dual focus on development and energy security. China’s energy policies vividly illustrate this two-tier approach, which aims to promote renewable energy development and reduce carbon emissions, while also ensuring energy security in the near-term future11. The government made heavy investments in renewable energy sources like solar and wind power and established ambitious targets for expanding renewable energy capacity. However, it also continued to build new coal-fired power stations12 despite receiving criticism.  

The journey ahead 

China’s attitude towards self-reliance doesn’t necessarily imply that it wants to retreat from the global stage, the very platform that has facilitated its current growth. Recently, the Chinese government released the “Opinions on increasing efforts to attract foreign investment: State Council’s Notice on Further Optimising the Foreign Investment Environment”13 to enhance the business environment for foreign investors and boost their confidence during an economic slowdown and a more challenging international trade environment. However, many still believe the Chinese government’s primary focus currently remains on security and stability14. Just like any concept, the meaning and the practical reality of “self-reliance” can vary significantly in different circumstances and from one leader to another. The choices made by the Chinese government in the coming years will not only reshape China’s destiny but also have far-reaching consequences for the global economy.  

What does this mean for investors? 

To navigate the changing landscape of China-related investments, awareness of China’s identity and values is essential. Crucially, the relative cohesiveness of the population makes China distinctly different to many other nations. As the country continues to shape its destiny and role on the global stage, these cultural and historical underpinnings remain critical factors influencing both China’s trajectory and its repercussions on the global economy. Investors will need to keep this context in mind when responding to its policy signals and making related investment decisions.