Cover illustration MERICS Report The party knows best
3 min read

The party knows best: Aligning economic actors with China's strategic goals

As the Chinese Communist Party (CCP) approaches the 2023 Third Plenum, an event which will give important indications on the future of China’s economy, we are excited to launch our new report titled “The party knows best: Aligning economic actors with China’s strategic goals.” Our economists analyze the meaning of the fundamental shifts in China’s economic governance that are currently unfolding.

You can access the web version of individual chapters via the table of contents below or download a PDF version here:

Executive Summary

After a decade in power Xi Jinping has fundamentally reshaped China’s political economy and the nation’s reform path. The shifts currently unfolding in China’s economy are showcasing the systemic features of what China’s leaders today call “Chinese-style modernization” and how it will materialize at home and abroad. Read more

Chapter 1: A new era: Xi steers China’s economy on a different path

China is contending for the central position in the global economic order and to establish itself as an innovation power. Xi’s new policies are responding to slower growth and perceived Western containment, but they also aim to establish foundations for a new development path for China’s economy. Beijing’s answer is a tech-centered agenda. Read more

Chapter 2: Xi’s policies serve strategic national goals beyond growth

Xi Jinping economic thought is expanding the roles of the party and state to guide economic actors towards Beijing’s strategic goals. Xi uses market forces as a tool when convenient, but only as a part of a broader party-state toolkit. Read more

Chapter 3: The party state’s emerging toolkit gets companies in line

The government understands that private firms often have the dynamism and creativity SOEs lack to innovate and commercialize emerging technologies - key ingredients for China’s new development agenda – but that they sometimes need steering to develop the ‘right’ technology. Read more

Chapter 4: Beijing advances technological self-reliance by all means

Tech self-reliance in a geopolitically focused economy is the central goal that Xi has in his economic agenda. A whole-of-nation approach aims to close tech gaps and make China less dependent on foreign actors Xi believes aim to hold China back. Read more

Chapter 5: Xi’s emerging social contract puts strategic objectives first

The transition towards a consumption led growth model is taking the back seat. Achieving industrial policy objectives takes precedence over advancing socio-economic targets, so long as the economic baseline is held. Read more

Chapter 6: China contends for the central position in the global economy

Key features of China’s global engagement are challenging the existing economic order, mitigating risks with liberal market economies and engaging with emerging and developing countries. Read more

Chapter 7: Beijing struggles to balance economy and ideology

It is becoming inherently difficult to reconcile economic interests with political ones and obvious that pursuing geopolitical priorities comes with a price on the economy. Read more