“The old is dying and the new cannot be born,” the Italian Marxist theorist Antonio Gramsci wrote in the early twentieth century. We seem to be living in a similar interregnum today, likewise marked by “a great variety of morbid symptoms,” including, not least, the breakdown of global supply chains and the return of inflation. The only way forward is to support the development of new markets, industries, and institutions. But who will finance this effort?

Five years into a once-unthinkable trade war with China, US Treasury Secretary Janet Yellen chose her words carefully on April 20. In a wide-ranging speech, she reversed the terms of US engagement with China, prioritizing national-security concerns over economic considerations. That formally ended a 40-year emphasis on economics and trade as the anchor to the world’s most important bilateral relationship. Yellen’s stance on security was almost confrontational: “We will not compromise on these concerns, even when they force trade-offs with our economic interests.”

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.

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.

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.

In March 2022, the Chinese government set a target of 5-5.5% GDP growth for the year. At the time, such growth levels appeared perfectly attainable. But within a month, the Omicron variant had arrived, triggering strict lockdowns that, while stemming the spread of the coronavirus, caused serious damage to the supply and demand sides of the economy. China’s growth rate for 2022 was just 3%.

With the lift of zero-Covid restrictions, Chinese policymakers are in search of a new politico-economic model to sustain Chinese growth and innovation in the 2020s.

Most experts see China’s economy moving on an upward track. If a 5.0 percent growth rate is achieved this year, as expected, China will contribute 0.9 percentage points to slumping global GDP growth, and it will continue to be a leading economic engine in the years ahead.

China will stay on a positive trajectory this year, but its achievements did not come easily. Some fundamentals still need to be addressed, as the foundation underpinning the recovery is not yet rock solid. Boosting incomes would make a difference.