[US-China Economic War Series] 8. China's Economic Security: Concepts and Strategy

I. Introduction

Following the era of neoliberalism, where the pursuit of economic efficiency was paramount, global interest in economic security has been growing. Amidst escalating strategic conflict with the United States, China is also forming a new security perspective and reorganizing its leadership structures to define and pursue economic security more concretely. In his report to the 20th Party Congress in 2022, President Xi Jinping stated that the changes in the world, the times, and history are unfolding in unprecedented ways (习近平 2022). In this era of global upheaval (global zeitenwende), the geopolitical competition between the United States and China is a crucial factor determining the future direction of global order transformation.

As the US-China strategic competition unfolds complexly across various domains, discussions are taking place at multiple levels (Kim Sang-bae 2022; Lee Seung-ju 2019; Kim and Kim 2019, etc.). However, the fundamental positions of both the US and China regarding the primary causes of their conflict remain sharply opposed. From China's perspective, the shift of the West, which was very friendly to China in the early stages of reform and opening up, to an offensive stance is explained as an inevitable change due to the shift in the balance of power; it is something that is bound to occur as the power gap between the US and China narrows. As seen in the relationships with the Soviet Union during the Cold War and Japan in the 1980s, the US actively contained challenging countries when their GDP reached about 60% of the US's, inevitably leading to competition between great powers. In contrast, Susan Shirk, a scholar of Chinese politics in the US, argues that the competition between the US and China is a backlash stemming from China's overreach, and that China's overreach is occurring simultaneously on three fronts: economic, social control, and foreign policy (Shirk 2023).

Whether viewed from the perspective of the power gap between the US and China or from the perspective of China's overreach, the Xi Jinping era, which began in 2012, marked a new turning point in China's economy, social control, foreign policy, and security. Therefore, this paper first examines in Chapter II how core security has changed and the role of the Party has been strengthened in China since the beginning of the Xi Jinping administration in 2012. Based on this, Chapter III examines how China defines economic security under its new security concept of comprehensive national security and how it has established leadership bodies for this purpose. Chapter IV reviews China's assessment of its economic security situation during the Xi Jinping era and, based on this, examines China's strategy toward the United States. Chapter V summarizes the above content and discusses its implications for Korea.

II. Core Security and Strengthening the Party's Role in the Xi Jinping Era

A significant change since Xi Jinping came to power in 2012 is the prioritization of security (安全) over economic development, which was the source of the Chinese Communist Party's political legitimacy. In September 2023, the Financial Times reported that facing increasing external threats, the Chinese government's priority has shifted to security and self-reliance rather than double-digit economic growth (White and Yu 2023). The Chinese government's recent emphasis on security is evident not only in the media but also in the annual Government Work Report. Choi Pil-soo (2022) organized the keywords emphasized in China's Government Work Report and related key documents (see Table 1 below). The keyword "manufacturing powerhouse," which was central to "Made in China 2025," has not appeared in the Government Work Report since 2020; instead, terms such as security (安全), industrial chains, and supply chains are used in conjunction.

Table 1. Trend of Key Emphasized Keywords in China's Major Policy Documents

Source: Choi Pil-soo (2022)

What kind of security is being emphasized in China? According to Bates Gill, the core objective of China's security and foreign policy during the Xi Jinping era can be defined as maintaining and strengthening the legitimacy and survival of the Chinese Communist Party (Gill 2022). This core objective of foreign policy, centered on the survival and legitimacy of the CCP, is quite contrary to the traditional factors determining the foreign policy of individual states in international politics. While factors such as competition between states or the maximization of national power are not unimportant to China's top policymakers, the survival and strengthening of the Party's power are more central. This implies that the Party's interests (party interest) for its survival take precedence over national interests and even diplomatic interests.

What are the characteristics of China's foreign policy since Xi Jinping came to power? First, the separation of Party and government (党政分开), which implied a division of roles between the Party and the government before Xi Jinping's administration, has changed to the Party leading everything. This was included in the Party Constitution in 2017, stating that the Party leads everything: "Party, government, military, people, and education; East, West, South, North, and Center; the Party leads everything" (“党政军民学，东西南北中，党是领导一切的”). Second, in 2018, Xi Jinping's foreign policy ideology, "Xi Jinping Thought on Diplomacy with Chinese Characteristics for a New Era" (习近平新时代中国特色社会主义外交思想), was designated as the diplomatic guideline. Furthermore, in 2020, the Center for the Study of Xi Jinping's Diplomatic Thought (习近平外交思想研究中心) was established within the China Institute of International Studies under the Ministry of Foreign Affairs. Third, in 2018, the Party's leadership over the Chinese state was explicitly enshrined in the Constitution as an inherent characteristic of socialism with Chinese characteristics. Fourth, the Party's control over the State Council has been strengthened. For example, the National Academy of Governance (国家行政学院), which was responsible for the re-education of civil servants and previously a direct subordinate agency of the State Council, was incorporated into the Central Party School (中央党校), an institution for training CCP cadres, in 2018. Fifth, since Xi Jinping came to power, the current situation has been defined as a period of "great changes unseen in a century" (百年未有之大变局), emphasizing the need to "dare to struggle, dare to win" (敢于斗争, 敢于胜利). In this context of struggle, the Party's control and coordination across all areas, including the economy, society, and military, are being strengthened.

III. China's Definition of Economic Security and Its Leadership Structure

1. Comprehensive National Security Concept and Economic Security

Since Xi Jinping assumed leadership, discussions on economic security (安全) in China need to be understood in conjunction with the comprehensive national security concept, which represents the national security perspective of the Xi Jinping era. Upon taking office as General Secretary of the CCP in 2012, Xi Jinping first presented the strategy of the comprehensive national security concept at the first meeting of the Central National Security Commission in April 2014. Subsequently, at the 19th Party Congress in October 2017, the comprehensive national security concept was established as a fundamental policy of socialism with Chinese characteristics for a new era and incorporated into the Party Constitution. This marked the first time in the history of the Chinese Communist Party that a national security theory was mentioned in a Party Congress report and included as a key component of the Party's guiding ideology. At the 20th Party Congress in October 2022, the concept was further elaborated, emphasizing the modernization of the national security system and capacity, and ensuring new development under new security circumstances with economic security at its core.

The comprehensive national security concept presents a total of 16 directions, encompassing not only traditional security domains but also non-traditional and emerging security domains.[2]It is summarized into five key elements and five key relationships. The five key elements emphasize walking the path of security with Chinese characteristics, with people's security as the ultimate goal (宗旨), political security as the foundation, economic security as the basis, military security, cultural security, and social security as guarantees (保障), and international security as the pillar (支柱). Furthermore, the five key relationships are also emphasized to realize the comprehensive security concept.[3]are also important.

The comprehensive security concept emphasizes China's unique security path and also stresses adherence to the following five points: upholding the "absolute leadership" of the Party in security work, upholding national interests as supreme, upholding people's security as the ultimate goal for common security, and upholding the great rejuvenation of the Chinese nation. Among these, "the Party's absolute leadership" is the most important and the fundamental political principle of national security. The Central National Security Commission is an appendage organization of the Chinese Communist Party, and Xi Jinping provides unified leadership for national security work (Yoo Dong-won 2019).

Ultimately, economic security is considered the foundation of comprehensive security, with the Party's absolute leadership under Xi Jinping at its apex, firmly establishing the overall ideology of national security. Chen Yuxue and others at the Central Party School of China summarize the broad implications of economic security in China into the following three points. First, the right to independently determine and act upon the nation's economic sovereignty, economic lifeline, its economic system and development strategy, and the utilization of natural resources and major economies must not be infringed upon. Second, economic development must not be threatened or infringed upon by domestic or international factors, and sustainable development conditions must be met. Third, the nation must possess strong economic competitiveness, resource and energy security capabilities, crisis management capabilities, and the ability to participate in the establishment of international economic rules (陈宇学, 许彩慧 2023).

China's Party leadership aims to construct an ideology of economic security with Chinese characteristics under the broader umbrella of the comprehensive national security concept, without merely imitating the economic security ideologies of Western countries. In the comprehensive national security concept, economic security serves as the substructure, playing a foundational role for overall security. Economic security, as emphasized in the comprehensive national security concept, also seeks to establish a national security path with Chinese characteristics under the core leadership of the Party, which is responsible for the security domain.

Reflecting this, the 14th Five-Year Plan (2021-2025), which began in 2021, provided guidelines for comprehensive economic security. First, it proposed strengthening and improving the resilience of industrial and supply chains during the 14th Five-Year Plan period. This involves complementing the weaknesses in industrial and supply chains, creating strong links, and establishing more complete and efficient industrial and supply chains in core and critical industries to help maintain the stable proportion of manufacturing in the national economy. Second, to ensure food security, food security laws must be enacted, and a system for the production, procurement, storage, and sale of grain, as well as a mechanism for ensuring the supply of important agricultural products, must be perfected. Third, energy resource security must be strengthened, the energy revolution promoted, and the energy production, supply, storage, and marketing systems improved. Fourth, systemic financial risks must be prevented, and the financial risk prevention, early warning, disposal, and accountability systems improved, with continuous enhancement of overall coordination and comprehensive management. Through this, a modern financial regulatory system with comprehensive and consistent authority and responsibility must be perfected (卢委, 谢玉科 2023).

2. Leadership Structure

As the leadership body for operating the comprehensive national security concept, the Chinese Communist Party decided to establish the Chinese National Security Commission under the Central Committee at the Third Plenary Session of the 18th Central Committee in November 2013, through the "Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reform." Xi Jinping stated the purpose of establishing the National Security Commission as follows (人民网 2014):

The purpose of establishing the National Security Commission is to better adapt to the new situations and new tasks facing our national security. It is also to establish a centralized, unified, and highly efficient national security system to strengthen leadership over national security work.

Heo Jae-cheol (2014) describes the differences between the Central National Security Commission and existing national security-related bodies as follows. First, the participating units have been expanded compared to existing national security-related bodies. The National Security Work Leading Group (the external name for the Central Foreign Affairs Work Leading Group), which previously served as the national security control tower, included only key personnel related to traditional national security, such as military, diplomacy, intelligence, economy, and propaganda departments. However, the Central National Security Commission includes all security-related personnel from the 16 directions emphasized in the comprehensive national security concept. Second, it has been institutionally stabilized compared to existing security-related bodies. The leading groups responsible for existing security domains have been more formalized and institutionalized as security control tower bodies. Third, the authority of the organization has been elevated through the direct participation and leadership of key national leaders. From its inception, the Central National Security Commission has increased its authority by having the General Secretary and the Premier serve as Chairman and Vice Chairman, respectively. While typically a member of the Politburo Standing Committee is responsible for one leading group, the Central National Security Commission consists of a Chairman and multiple Vice Chairmen, all of whom are members of the Politburo Standing Committee. As of 2023, the Central National Security Commission is chaired by General Secretary Xi Jinping, with Premier Li Qiang (李强, second in Politburo ranking), Zhao Leji (赵乐际, third in Politburo ranking), and Cai Qi (蔡奇, fifth in Politburo ranking) serving as Vice Chairmen.

IV. Assessment of China's Economic Security Situation in the Xi Jinping Era and Strategy Toward the United States

1. China's Assessment of Domestic and External Economic Security Situations

How does the Chinese leadership assess China's economic security situation during the Xi Jinping era? Through the research of Chen Yuxue and others (陈宇学, 许彩慧 2023) at the Central Party School, we can infer the Chinese leadership's assessment of the economic security situation. They describe the changes in the external and internal environments facing China as follows. First, the external environment China currently faces can be summarized by the intensifying economic and trade competition between China and developed countries such as the US and Europe, the pursuit by emerging economies in Southeast and South Asia, the wave of unilateralism and anti-globalization, and the full-scale intensification of security-centered competition.

These external environmental changes, first, create a strategic dilemma between Western developed countries and China. China still relies on the West in many aspects. While China possesses diverse industrial sectors and has achieved advantages in scale and coordination (配套) in many industrial fields, its control and influence in the value chain of industries and the demand-supply value chain are weak compared to Western developed countries. Furthermore, it is not free from foreign dependence and control in markets, high-tech, high-end brands, core components, and top talent. It also lacks the right and voice to set international order and rules. For example, the three pillars of the global economic order, namely the World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank, were established and are led by Western countries. Finally, China is vulnerable to the bidirectional volatility of transnational capital. A sharp contraction or increase in total capital flows can weaken China's independent innovation and international competitiveness, negatively impacting economic security.

Second, the challenges from emerging developing countries are also rapidly increasing. In the process of changes in the international division of labor, emerging developing countries in Southeast and South Asia are rising, leveraging their latecomer advantage. The traditional position of China as the "world's factory," maintained for the past 30 years, is being rapidly replaced by latecomer countries. For instance, in 2021, trade volume between China and ASEAN recorded an increase of 27.5% year-on-year to $878.2 billion. Among this, imports grew faster than exports, resulting in a trade deficit of $90 billion with ASEAN. This indicates that a significant portion of the role of the "world's factory," previously monopolized by China, is being transferred to ASEAN countries.

Third, the increasing uncertainty due to the spread of unilateralism in international trade is also a very significant external threat factor. The global trade order is shifting from multilateralism to unilateralism, and Europe and the United States are striving to create de-Sinicized value chains. Developed countries in the West are concluding bilateral or plurilateral agreements to curb China's rise in advanced manufacturing sectors, creating exclusive and discriminatory trade practices against China. Amidst the spread of anti-globalization sentiment, China keenly feels the need to create a safe and controllable economic development path centered on China.

The changes in the internal environment facing China also pose new challenges to economic security. China is currently facing numerous contradictions arising from the transition of its economic development model, and contradictions accumulated in the past, along with newly emerging instabilities, are exacerbating economic and social vulnerabilities. The first internal threat factor facing China can be described as the structural contradictions confronting the Chinese economy. More specifically, China currently faces structural contradictions in domestic supply and demand, characterized by the coexistence of overcapacity and insufficient consumer demand. There are also contradictions between domestic and export demand, contradictions between resource-intensive and innovation-driven production methods in energy consumption, the dualistic structural contradiction between urban and rural areas, contradictions arising from regional economic disparities, and structural contradictions in the industrial sector, making the transition from a manufacturing giant to a manufacturing powerhouse difficult. Second, due to the characteristics of the domestic system, the balance between government and market relations remains unresolved. Third, economic cyclicality is also functioning as a significant internal factor. The primary reason for the current difficulty in China's economic recovery is the persistent problem of overcapacity, leading to a mismatch between insufficient supply in needed areas and oversupply in unnecessary areas, creating cyclical imbalances. To address this, the government has implemented supply-side reform measures such as reducing overproduction, inventory, and debt, and strengthening environmental regulations. Despite some achievements, the phenomenon of "state advance, private retreat" (國進民退, the comprehensive growth of state-owned enterprises and the relative retreat of private enterprises) has occurred, increasing the debt burden and the possibility of default for private enterprises.

2. Strategy Toward the United States

Among the various domestic and external threat factors concerning China's economic security situation, the most potent threat is the US-China strategic competition, which began in earnest with the trade and commerce dispute in 2018. What strategy is China adopting in the face of escalating US-China strategic competition? Yao Rukuan and Jin Chanrong of Renmin University of China, among others, summarize China's strategy toward the US as follows (姚汝焜, 金灿荣 2023). China is first striving to strengthen strategic communication with the United States. The fundamental US strategy for China is to acknowledge mutual differences within strategic communication and find ways for mutual coexistence. However, at the same time, China declares that it will strongly fight against any US threat to protect its core interests, such as sovereignty and territory. China's specific strategy toward the United States is concretized in four forms in its diplomatic practice.

First, China emphasizes that differences between the US and China do not necessarily lead to conflict. For example, at a press conference in March 2022, then-Premier Li Keqiang stated that while disagreements between China and the US are inevitable, cooperation should be the mainstream, as world peace and development depend on cooperation (新华社 2022a). Furthermore, in 2022, then-Foreign Minister Wang Yi stated in New York that the different systems of China and the US are the choices of their respective peoples, and that China and the US cannot replace each other or defeat each other (新华社 2022b). Moreover, when President Xi Jinping met with President Biden in Bali on November 14, 2022, he emphasized that acknowledging and respecting the differences between China and the US is the most important aspect of China-US relations, rather than imposing uniformity and trying to change or even subvert the other's thinking (新华社 2022c).

Second, while emphasizing coexistence amidst differences between the US and China, China simultaneously stresses that it is a status quo state that has no intention of altering the existing international order or challenging the US's international position. While emphasizing its intention to maintain the status quo, China attributes the escalating US-China conflict to the US's Cold War mentality and strategy. In 2022, then-Foreign Minister Wang Yi, referring to the US indirectly as "a certain major power" (个别大国), criticized that "it is using Cold War mentality again to maintain its hegemonic position, creating bloc confrontation and further exacerbating chaos and division, making an already problematic world even more chaotic" (新华社 2022b).

In February 2023, Xinhua News Agency reported on a "Report on US Hegemony, Hegemonic Behavior, and Bullying and Their Harm" (新华社 2023), summarizing these criticisms of the United States. Although Chinese state media extensively reported on this report, the author was not specified, and even Chinese scholars identify it as a report from the Ministry of Foreign Affairs. The report criticizes the US for abusing its hegemony in political, military, economic, financial, technological, and cultural fields, and argues that the US's unilateral, selfish, and regressive hegemonic practices pose a grave threat to world peace and stability, and the well-being of all peoples.

V. Conclusion and Implications for Korea

China views the current situation as a critical period unseen in the past 100 years and is engaging in comprehensive struggle by strengthening the Party's overall control with Xi Jinping at its core (以习近平为核心). The core objective of Xi Jinping's foreign policy ideology and the comprehensive national security concept is the survival and prosperity of the Party, with Xi Jinping at its core. China's core objective of economic security can also be seen as playing a material foundation role for achieving the core objective of survival and prosperity for Xi Jinping and the Party. This economic security objective of China has the following three implications for Korea.

First, China's centralized economic security policies during the Xi Jinping era imply that Korea is likely to face comprehensive competition with China, from advanced science and technology to the supply and demand of critical minerals. President Xi Jinping emphasizes that scientific and technological innovation is crucial for economic development, especially in a situation lacking economic growth vitality, and highlights that advanced technologies such as artificial intelligence, quantum information, DNA editing, new materials, and new energy can determine the fate of a nation (习近平 2021). This emphasis on science and technology is creating a more centralized drive for innovation than in the past, meaning that Korean companies are highly likely to face comprehensive competition with Chinese companies that receive active support from the Chinese government. Furthermore, China is strengthening South-South cooperation with Africa and BRICS (Brazil, Russia, India, China). Given Chinese companies' strong grip on the critical mineral value chain and the results of South-South cooperation, competition with China is expected to intensify for Korean companies in securing critical minerals.

Second, as a second-order effect of the US-China strategic competition, a new form of interdependence, previously non-existent, is emerging between Korea and China. In response to US semiconductor sanctions, China is pursuing the construction of a non-US-centric supply chain, encouraging the embedding of Korean companies within China's semiconductor supply chain (Kim Yong-shin 2023). Similarly, to circumvent the US Inflation Reduction Act, Chinese companies that have entered Korea may become embedded in the Korean battery supply chain. In the past situation of "Anmi-Gyeongjung" (安美經中, prioritizing security with the US and economic engagement with China), Korea tended to rely heavily on the Chinese market. However, in the new situation, there is a possibility of developing into a complex dependency situation, relying not only on the market but also on resources and technology. China is seeking to deepen nodes and degrees of interdependence with more countries to counter competition with the US and weaponize them in times of crisis. Ultimately, Korea must proactively and strategically respond to the newly emerging interdependence between Korea and China.

Finally, China seeks to encircle the United States through enhanced diplomacy with neighboring countries and South-South cooperation. This strategy is a borrowing from Mao Zedong's strategy of encircling the cities from the countryside. In other words, rather than a direct confrontation with the US, China aims to expand its support base by increasing economic assistance to developing countries, thereby encircling Western developed countries from the perspective of developing countries. In this context, China presents "Chinese wisdom" or "Chinese solutions," arguing that Westernization is not the only path to modernization. China aims to undermine the US-centric international order through diplomacy with neighboring countries, and strategic responses from Korea are also necessary for its diplomatic approach toward Korea. ■

References

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[1] In this article, the Chinese term "安全 (ānquán)" is translated as "security" in Korean. However, for proper nouns referring to Chinese institutions, the term "安全 (ānquán)" is retained. For example, the concept of security since the Xi Jinping era, "总体国家安全观 (zǒngtǐ guójiā ānquán guān)" (Overall National Security Concept), is translated as "총체적 국가안보관 (chongchejeok gukga anbogwan)" (Overall National Security Concept), while the proper noun Central National Security Commission is transliterated directly from its Chinese pronunciation.

[2] Politics, military, territory, economy, finance, culture, society, science and technology, cyberspace, food, ecology, resources, nuclear, overseas interests, space, deep sea, polar regions, biology, artificial intelligence, data

[3] The five relationships are as follows: ① Simultaneously considering development and security issues, ② Emphasizing both external and internal security, ③ Emphasizing both territorial and public security, ④ Emphasizing both traditional and non-traditional security, and ⑤ Emphasizing both one's own security and common security.

■ Kim Yong-shin_Professor, Department of Chinese Studies, Inha University.

■ Managed and Edited by: Lee Ju-yeon_EAI Researcher

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