While America Bombs, China Builds
In
At China’s annual Two Sessions, the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) approved the outline of the 15th Five-Year Plan and set the economic growth target at 4.5 to 5 percent, down from the roughly 5 percent benchmark
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While America Bombs, China Builds
At China’s annual Two Sessions, the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) approved the outline of the 15th Five-Year Plan and set the economic growth target at 4.5 to 5 percent, down from the roughly 5 percent benchmark that prevailed since the pandemic. Predictably, some observers interpret the lower figure as evidence that China’s economic engine is slowing and that its rise is weakening. That interpretation misses the strategic shift underway. Rather, the lower target reflects a change in priorities that has been developing for more than a decade. For Beijing, economic growth is increasingly subordinate to self-reliance.
For decades, China’s economic rise was powered by integration into the global system. Foreign capital flowed in, Western technology crossed borders, and international expertise helped accelerate industrial upgrading. The model worked spectacularly well. But it also created structural dependencies. From the perspective of China’s leadership, that dependence has always been viewed as a liability. As geopolitical competition intensifies and technology becomes a tool of strategic pressure, reliance on external supply, expertise and capital creates vulnerabilities. Tensions around the Strait of Hormuz, which threaten one of the world’s most critical shipping lanes, further highlight how quickly global supply chains can become geopolitical choke points, from disruptions in fertiliser and energy markets to shortages of strategic resources such as helium.
These challenges have only vindicated Beijing’s concerns. In Xi’s view, economic growth that relies heavily on foreign technology, resources and capital is ultimately fragile. Zhongnanhai appears prepared to accept slightly slower expansion if it results in an economy less exposed to external pressure. Both the proposed 15th FYP and the revised growth target double down on this notion. One of the clearest signals of this shift lies in China’s commitment to research and development. The new plan calls for annual increases of roughly 7 percent in R&D spending, placing technological advancement at the centre of China’s long-term strategy.
President Xi Jinping has repeatedly framed technological innovation as the decisive arena of global competition. Scientific breakthroughs and advanced industries, he argues, will underpin both economic prosperity and national security. That ambition is reflected in the sectors Beijing is prioritising. Beyond the green technologies China already dominates, the plan highlights emerging industries that could shape the next wave of global leadership: AI, quantum computing, biotechnology, hydrogen energy, nuclear fusion, and next-generation communications such as 6G.
At the same time, the technological rivalry with the United States continues to evolve. After the summit in Busan, where Xi and Trump decided to cease export control escalations on semiconductors and rare earth elements, respectively, a meeting between the two presidents was expected in April, although the war in the Gulf has complicated the timetable. The Trump administration is seeking to postpone it by at least a month.
Washington has already loosened some of the sweeping export controls introduced during the Biden era, including restrictions on Nvidia’s H200 chips, provided they are subject to a 25 percent export fee paid to the U.S. government. Yet China has shown reluctance to rely on imported chips even if access becomes easier. In line with its commitment to self-reliance, Beijing has instead doubled down on domestic semiconductor development and prioritised its own domestically designed – though still less advanced – semiconductors. Once again, self-reliance takes precedence over short-term gains in computing capacity.
In recent years, the American AI ecosystem has taken the opposite path, increasingly relying on capital inflows, notably from the Gulf. Sovereign wealth funds in the region have invested heavily in American AI companies and have become major customers for U.S. chips in the construction of regional data centres. But these facilities now sit in a region increasingly exposed to geopolitical escalation. Iranian drones and missiles have already hit data centre infrastructure in Bahrain and the UAE. If tensions continue to escalate, Gulf leaders and sovereign wealth funds may think twice before relying on the United States for both AI technology and security guarantees. Such doubts could carry long-term consequences for the American AI ecosystem and for U.S. defence exports to the region.
The broader contrast is striking. The United States is currently engaged in military operations against Iran alongside Israel, while Iran retaliates with missile and drone attacks across the Gulf and threatens shipping through the Strait of Hormuz. China – despite being a significant energy importer from, a weapons supplier to, and a self-described “comprehensive strategic partner” of Iran – has limited its response largely to rhetorical condemnation of the American-Israeli strikes, while urging restraint from all sides. Beijing has little interest in becoming entangled in a distant military quagmire. Rather, it would prefer the conflict to cease as soon as possible.
The geopolitical spillovers will be felt elsewhere too. A prolonged disruption in the Strait of Hormuz is driving up global energy prices, delivering a windfall to Russia’s war economy. The consequences of escalation in the Middle East may ultimately be felt most acutely on the battlefields of Ukraine.
The optics are difficult to ignore. While the United States is absorbed in conflict in the Middle East, China is focusing on building out technological and innovation capacity. Whether China’s growth rate settles at 4.5 or 5 percent will ultimately be of little concern to Xi.
(Photo credit: Wikimedia Commons)