The shift of the US policy from engaging China to containing China can be traced back to the Obama administration and his pivot to Asia strategy in 2009.

Recent years have seen a surge in interest in framing China’s developmental trajectory as an exceptional story attributable to the excellence of the Chinese people and its governance model. But to understand such transformations fully, we must recognize and acknowledge the role often played by Western ideals and innovation; only then, could we be seeking real truths from substantive facts.

The People’s Republic of China wishes to increase domestic consumption to reduce reliance on western trade, technology, and knowledge. One attempt at this is inviting western companies to learn their business strategies, enable domestic competitors, and use mass media to sway consumer spending. This strategy has had mixed success, and increasing domestic consumption will be difficult as the economic recovery from COVID is slower than expected.

The EU and U.S. recently announced a deal providing America favorable treatment to European critical materials. The agreement will deepen cooperation and decrease their dependency on China, but potential consequences remain uncertain. In the future, the EU should adopt a more ambitious stance to strengthen their position as a self-reliant and influential global geopolitical force, as they navigate the delicate balance between Beijing and Washington.

The decline in trade cannot continue, as both countries need each other. It can be expected that they will patch up their disputes and work together, turning the numbers around to bring more tangible benefits to their people.

Consumption is the key. To restore and expand it, China needs to roll out sound, targeted policies. Obstacles that currently hinder consumption growth need to be removed, especially in the real estate and automobile sectors.

The Russia-Ukraine war has shaken Europe’s energy security, triggering major adjustments in supply chains, consumption and renewable energy development. The conflict and its spillover effects suggest that a new economic cold war may already be underway.

The end of ‘zero-COVID’ policies may have produced some private sector optimism about the country’s growth trajectory but certain indicators reveal a weakness in the system. Policymakers and investors remain skittish on China, increasingly looking to Southeast Asia as a haven of financial promise and stability.

Industrial and supply chains have become the main theater of competition between China and the United States. America’s technology war will be deliberate, intense and long-term. For this reason, China must be strategically prepared for a protracted fight.

The year 2023 represents a turning point. If economic realities guide global prospects, it will be a positive turnaround. If geopolitics will continue to penalize economic prospects, a negative inflection point is more likely.