China

Economic means for global power and influence
 

China is the second largest economy in the world, and economic means remain its most important foreign policy tool. Beijing has launched several initiatives that are to help establish a China-centric world and boost its international power and influence. The initiatives are designed to offer other countries good relations with, market access to, and significant investments from China. In return, these countries promote China’s interests by providing access to technology, natural resources and global supply chains, as well as by supporting Chinese positions internationally.

Structural challenges hamper and dampen the growth potential of the Chinese economy, and growth has slowed. These challenges include weak consumer confidence, a volatile property market, high youth unemployment and high debt levels among local authorities.

Since the pandemic, China has also struggled with low domestic consumption. In autumn 2024, the Chinese authorities launched a set of measures to stimulate the economy, and additional measures are expected in 2025. These measures will probably increase domestic consumption, though not enough to prevent growth from stagnating further in the years ahead.

In 2024, the Chinese authorities set a growth target of around five per cent. Due to structural economic challenges and low consumer confidence in the Chinese population, China relies on exports to reach this growth target. Hence, China is vulnerable to sanctions at a time marked by increasing international tension over issues such as the war in Ukraine and the question of Taiwan.

In spite of the growth target, China prioritises economic security over growth. The government has set new and ambitious goals for China’s economy to become ‘risk-controlled and self-sufficient’ by 2029. By reducing its dependence on Western markets and increasing the West’s reliance on Chinese goods and inputs, China can make itself less vulnerable to Western sanctions and gain more leverage to advance its own interests.

State subsidising of advanced technology and strategically important sectors will continue, increasing China’s global competitive advantage and market shares. Chinese state-subsidised production includes batteries, solar cells and electric vehicles.

Combined with intelligence activity and an offensive diplomacy, China uses subsidies as a strategic tool to establish dominance in important value chains, production and infrastructure. China can exploit this dominance to exert pressure on countries and organisations.

China exported five million electric vehicles to the global market in 2023, and figures were expected to be 25 per cent higher in 2024. To shield European electric vehicle manufacturers from the competitive advantages that state subsidies provide to Chinese manufacturers, the EU increased tariffs on Chinese electric vehicles in the autumn of 2024. Continued Chinese subsidisation of export-oriented production in key sectors will continue to create tension between Western and Chinese trading partners.

Military-civil fusion is to harness relevant technology developed or procured in the civilian domain for military purposes. A large proportion of the emerging and disruptive technologies that China’s armed forces and security services seek to acquire is dual-use technology developed by commercial actors in the civilian sector.

US export restrictions on technology have boosted China’s interest in European tech providers. For example, China has increased its investments in the electric car industry in Europe, Asia and the Middle East to offset harsher US trade restrictions. China’s interest in acquisitions of and investments in European tech companies will continue.

This requires Chinese businesses to adapt to an investment climate with increasing restrictions and scrutiny from the West. China will have to work more purposefully and strategically in host countries than before in order to secure investment contracts and win tenders. Over time, Chinese businesses have cooperated with businesses in host countries in order to gain market access. In addition, Chinese actors utilise several commercial and financial mechanisms to conceal business activities that promote Chinese interests abroad. Chinese intelligence and influence activity in Europe supports both Chinese business policy and other national interests.

Chinese intelligence and security services (CISS) are conducting physical and digital operations against a wide range of targets in Europe, including political decision-makers, civil society, businesses and research and development institutions. The purpose of these operations is traditional intelligence collection of sensitive information, political subversion and industrial espionage.

In addition to its own intelligence personnel, CISS is authorised by Chinese law and has the resources to utilise all Chinese companies and individuals for intelligence, influence and other state purposes. There are close links between CISS and Chinese corporate entities. Chinese businesses, journalists, interest groups and private individuals carry out foreign assignments on behalf of CISS.

In order to weaken the West’s, and particularly the United States’, dominant international position, China routinely criticises Western initiatives and actions. China also pressures states, companies and individuals to refrain from or moderate critical discussions about China. It is becoming increasingly important for Beijing to maintain good relations with individual European countries, to prevent the EU from uniting around a more critical policy toward China.

Because of Norway’s NATO membership and strong integration into the international system, a good relationship with Norway has political symbolic value for Beijing. The Norwegian Arctic also remains important to China.

The Polar Research Institute of China has a presence and conducts activities on Svalbard, supporting China’s scientific and strategic ambitions in the region. However, China’s overall presence in the Arctic is limited. Investments in Russian liquefied natural gas projects are the largest and most prominent Chinese activities in the region.

China has ambitions to strengthen its presence, capabilities and influence in the Arctic in the coming years. China is facilitating this by strengthening cooperation with Russia on research and commercial activities, as well as by increasing China’s national icebreaker capacity. China currently has five polar icebreakers and is working on developing heavier icebreakers and icebreakers with nuclear propulsion. This enables more Chinese sailings in the Arctic, thereby increasing the ability to map the region for both civilian and military purposes.

China has the world’s second largest official defence budget, and the real defence-related allocations are probably far higher than indicated by the official numbers. This enables the fastest and most extensive military armament the world has seen since World War II.

China is further accelerating its defence modernisation leading up to the centennial of the People’s Liberation Army in 2027. Over several years, China has strengthened the strategic deterrent capability of the People’s Liberation Army (PLA) by integrating cyber capabilities, space capabilities and advanced precision weapons in its thinking on strategic deterrence, and by adding a significant amount of nuclear weapons to its arsenal.

President Xi Jinping has tightened his control over parts of the People’s Liberation Army (PLA). In spring 2024, the PLA replaced the strategic support forces with an information support force, a cyber force and a space force. These new forces are directly subordinate to the Central Military Commission, led by President Xi.

The PLA’s cyber forces are further developing the capability to digitally sabotage critical Western infrastructure. The forces have targeted critical infrastructure in the US, aiming to set the stage for future sabotage. Operations of this kind are part of the forces’ preparations for a potential military conflict with Western adversaries in areas close to China, particularly Taiwan.

China is becoming increasingly assertive and confrontational in its surrounding regions. It has militarised outposts and repeatedly used force against neighbouring countries in the South China Sea.

The navy, coastguard og maritime militia will continue to enforce China’s national interest vis-à-vis other actors in the region. The PLA will continue to train blockading and invading Taiwan, using the exercises to introduce new elements that fuel the military coercion campaign against Taipei. The coastguard will also participate in this coercion campaign, including by patrolling close to Taiwan and participating in military exercises.