Trump’s second presidency has brought new waves of instability to the world economy, not least his tariff campaign. Related to this is the rivalry between a declining US imperialism and a rising China that will add further to the crises factors in the global situation. While still not able to match the US in labour productivity in the economy overall, China has in some strategic sectors overtaken the US.
China is now dominating its capitalist rivals in technologies such as electric vehicles (EV), solar panel and wind turbine production, nuclear energy, shipbuilding, high speed rail and increasingly in AI. These advances are adding to the stresses among China’s economic and geopolitical rivals in an already stressed and increasing fractured capitalist world.
As a study from 2023 by the Australian Strategic Policy Institute – funded from the US government – put it: “China has built the foundations to position itself as the world’s leading science and technology superpower, by establishing a sometimes stunning lead in high-impact research across the majority of critical and emerging technology domains.”
The impact of the release of China’s AI DeepSeek RI in January this year shocked the western tech companies and governments. It initially sparked a $1 trillion sell-off on tech stock markets, including $600 billion wiped off the value of US chipmaker Nvidia.
As one tech expert writing for the Guardian newspaper commented: “The simplest take on R1 is correct: it’s an AI system equal in capability to state-of-the-art US models that was built on a shoestring budget, thus demonstrating Chinese technological prowess.”
In response, Nvidia lobbied Trump hard to be allowed to resume some exports of semiconductor chips to China, which has now been agreed. Clearly a case of no point in continuing to keep the stable door shut after the horse is long after bolting.
These technological advances have also been incorporated into China’s military capability.
It was not meant to be like this. China just two decades ago was operating as a giant assembly plant for the world in low value commodities, in particular for the US consumer market. Today, while still producing vast quantities of consumer goods, Chinese car maker BYD has recently overtaken Tesla as the largest producer of advanced electric vehicles in the world.
CATL, the Chinese Lithium-ion battery producing company, now holds a 40% share of the world market in EV battery production. Over 70% of EV sales globally come from in China.
Almost three-quarters of all solar and wind power projects being built globally are in China. Moreover, they also sell solar panels and wind turbines to Europe, Africa and Latin America. In many cases as part of the Belt and Road Initiative (BRI).
How has the Chinese state managed to make this transition to higher value production in some of the most advanced technologies in the world? And how was this achieved despite the efforts of US imperialism in particular to deny China access to technologies through embargoes, trade wars and now tariffs under successive presidents going back to Trump’s first presidency?
The fundamental reason has been the ability of the Chinese Communist Party (CCP), who control the state, to harness and direct investment into technologies at unprecedented speed and scale. To a level that is beyond that of any other global rival.
According to the Center for Strategic and International Studies (US), from 2009 to the end of 2023, China spent around $230bn developing the EV industry.
As of 2024, over four million workers were employed in China in the EV sector alone. 900,000 working for BYD, over 100,000 of whom are in technical research and development.
Building on existing technology from western car makers – for example Tesla who were allowed to build two factories in China to produce cars and EV batteries in 2019 – the leading Chinese companies were able to match and even surpass the technology within a few years.
This led Elon Musk to say in January 2024: “If there are no trade barriers established, they will pretty much demolish most other car companies in the world,” he said. The Biden US administration then imposed a 100% tariff on Chinese made vehicles.
Yet, currently 70% of all EVs built were made in China.
The same applies to renewable energy production – which China now dominates. As of the end of 2024 an estimated 7.4 million workers were employed in renewables. That is almost half of the world’s total renewable energy workforce.
These figures have to be balanced by the fact that the service sector plays a big role in the economy. There are 11 million workers for example who work in the fast food industry. Services accounted for 54.6% of China’s GDP and 49% of employment in 2023. The industrial and manufacturing sector contributed 38% to GDP, with 29% of the total workforce. Agriculture weighed in with 6.2% of GDP and employed 22% of the workforce.
By directing the enormous resources of the state – including the nationalised banks – for funding research and development – the CCP have been able to ensure rapid investment. From the building up of domestic supply chains, to the construction of factories to manufacture EV’s, solar panels and wind turbines on an unprecedented speed and scale.
While many of the companies involved are privately owned, the reality is they rely massively on the state for support, particularly for research and development and tax subsidies. Indeed it is the case that the CCP plays an increasing role in the economy, including in nominally private companies in strategically important sectors.
China’s dominance of critical minerals such as cobalt, nickel and graphite, essential for making batteries and solar panels, has also been a key factor in China moving up the value chain of production. And a useful weapon to threaten to withhold from other rivals amidst Trump’s trade wars.
These factors, underpinned by the exploitation of the Chinese working class, have provided it with an unrivalled flexibility to compete with more advanced economies like the US in certain sectors.
“It is difficult to overstate China’s singular lead across clean energy technologies. The gaps are both enormous and historically unprecedented,” were the thoughts of one contributor to a Washington Post analysis.
In 2015, the CCP adopted the Made In China 2025 strategy, which involved two five-year plans to advance China’s manufacturing base in a number of key sectors. An estimated $2 trillion has since been invested in new industries, including Robotics and AI.
They also hoped to become less dependent on exports to the world market, given the increasing geopolitical turmoil. Attempts to stimulate the internal market to compensate have largely failed however.
It is true that the ending of the almost 10% annual growth rates that predominated for the two decades or more pre-Covid delivered a challenge to the CCP. Today, economic growth is around half that at 5%. However, a falling birth rate and a declining population – a growing problem for the Chinese state – means the headline decline in the rate of growth of GDP is of lessened significance for an economy that is still currently growing.
The government have responded by pledging new child care subsidies, increased wages and better paid leave to revive the economy. That is on top of a $41bn discount programme if people trade in their older cars, mobile phones or even home insulation to try and stimulate economic growth.
However, deflation has dominated the challenges facing the Chinese economy over the last two years, linked to the collapse of the property bubble from 2021 and the failure of Evergrande. Falling property prices and a liquidity crisis has also impacted.
China’s gross domestic product deflator, a broad measure of prices across the economy, has fallen for eight straight quarters — the most prolonged downturn on record.
For many workers and middle class people in China there is a growing trend of refusing to buy a home. Why ’empty six wallets’ (the couple buying a house, their parents and grandparents) when you cannot afford to keep a house and it is losing value?
Overproduction of commodities as a rush to invest in production of key industries has overshot demand. Amid Trump’s tariffs and flatlining domestic consumer demand there are increasing challenges for the CCP regime. As a consequence the need for new markets, for example for EVs, means moving sales to Europe. With all the consequences of ratcheting up further trade tensions with the EU.
In other words China’s economy – while being a unique form of capitalism with a flexibility for the state to intervene that is unrivalled internationally – cannot fully overcome the problems facing the world economy.
Over-accumulation, over-production and the inability of the majority in China – the working class – to buy what they produce are all contributing to the ongoing issues facing the CCP regime.
This drive to produce in a wasteful and chaotic way, is inevitable in an economy dominated by a bureaucracy and not democratically controlled and managed by the working class. The New York Times described: “A promising technology or product emerges. Chinese manufacturers, by the dozens or sometimes the hundreds, storm into that nascent sector. They ramp up production and drive down costs. As the overall market grows, the competition becomes increasingly cutthroat, with rival companies undercutting one another and enduring razor-thin profit margins or even losses in the hope of outlasting the field.
“China’s local governments, each with its own target for economic and job growth, back a homegrown champion and shower it with financial and bureaucratic support. Soon, the whole industry, awash in production capacity, is trapped in a race for survival.”
Where did the resources come from for these investment?
There is nothing socialist or communist about China’s economic model in that socialism means the democratic control of the economy by the working class of an economy that is based on public ownership. The massive urbanisation and industrialisation policy adopted from the late 1970s, including China’s entry into the World Trade Organisation in 2001, was based on a managed introduction of capitalist relations into China under the control of a CCP regime.
It was fuelled on above all the exploitation China’s working class – which now number around 770 million, an increase of over 350 million since the capitalist reform process began.
The CCP leadership know from even a cursory understanding of Marxist economics, which is still taught as a compulsory subject in China’s school and universities, that by exploiting the labour power of 770 million workers you can create an awful lot of surplus value.
This is accrued by the indigenous capitalist class in China, as it is by foreign multinationals but a significant proportion of which is taken by the CCP-led state, in part to enrich themselves.
CCP leaders play a significant role in the state-owned enterprises but also private companies as well. For example sitting on the boards that help to ensure the wishes and plans of the party are carried out.
State-owned enterprises (SOEs) contribute around 25% to China’s GDP. On paper, the private sector seems to dominate the Chinese economy. For example, Xi in a speech in 2018 claimed that 90% of the 25 million companies in China are privately owned.
He went on to say that the private sector in 2018 delivered more than “50% of the country’s tax revenues, 60% of economic output and 80% of urban employment.” However, in many cases SOEs remained more prevalent in sectors that were deemed more strategic or socially important as China was opened up to the capitalist market in the 1980s and 1990s.
Increased role of the state
But as a recent study by Big Data China (an academic investigation that aims to arm the US government with information about Chinese development) indicated some important changes since 2018.
“For decades, China’s private sector consistently grew in scale and scope; however since the early 2010s there have been signs pointing to a resurgence of the state sector, with greater opportunities for state-owned enterprises (SOEs) and in some cases restrictions on private firms. This trend is often referred to as “state advance, private retreat” (guojin mintui).
“ Indeed, 71% of Chinese companies listed in the Fortune 500 list in 2022 and 84% by asset size were state-owned companies. This suggests that just looking at the official data on the number of SOEs in the economy might not be sufficient to understand the importance of the state-owned sector in China.”
“Take the top 1,000 private owners in China ranked by the sum of the registered capital of all the firms they own. Of those, 78% were state-connected, 63% directly connected and 14% indirectly connected.”
“Most importantly, the data reveals that between 2000 and 2019 the number of private owners that were directly connected to the state increased by almost three times. As the capital of firms with some state ownership has increased from roughly 61% in 1999 to 85% in 2017.”
This study and others like it indicate that in the past decade the CCP have markedly increased their involvement into the economy to drive forward their plan for the strategic sectors that it wanted to focus on.
It also meant curbing some of the growing influence of the Chinese capitalist class by using the state to intervene more robustly into the economy. Facing mounting economic problems it is possible that the state will continue or even increase its current role in the economy for a period.
Standing below, well below, the material conditions of the Chinese capitalists and the CCP bureaucracy are the working class, whose incomes are miniscule by comparison.
Moreover, the standard labour law in China which states that no worker should work longer than eight hours a day and 44 hours a week is not adhered to.
Recent strike action by thousands of electronics workers employed by EV giant BYD, in two cities in China in late-March and early April 2025, was linked to the cutting of overtime and an attempt to reduce the working week by company bosses. This amid a crisis of overproduction.
The wages of these workers was barely more that the minimum wage, which goes nowhere near to covering the cost of living. Demands for a shorter working week must be linked to the fight for a living wage for all workers, a 40 hour week without any loss of pay and the nationalisation under workers’ control of the major private sector companies in China.
Employees being forced to work on a 996 regime; from nine in the morning to nine at night, six days a week is often the case. That’s why the building of independent trade unions and the linking up of workers across China in company-wide and sector-wide combinations to fight for increased wages and a reduction of the working week is so important.
These conditions for workers are a million miles removed from the lavish lifestyles of the billionaires and CCP bureaucrats. According to the Huron Global Rich List there were 823 billionaires in China in 2025, just seven fewer than the US.
Income inequality is massive. The top 20% of households hold a 46% share of the income. While the bottom 40% own just 13.3%. Before the capitalist reform process was started in the late 1970s, the top 10% of individuals accounted for just 27% of national wealth share, with the poorest 50% also receiving 27% as well.
Therefore it can be concluded that there is little in common with the People’s Republic of China today and the aims of the heroic Chinese revolution of 1949. The iron rice bowl has been broken although not entirely shattered, having been largely buried under an avalanche of the capitalist counter-revolution.
These inequalities will inevitably lead to outbreaks of class struggle and mass dissatisfaction with the conditions of life. Indeed, this is a process already underway. Illusions in the system and life under the CCP rule are being burned away. That’s not to argue that there is still not a social base for the regime, including among sections of workers and the middle class.
There is however growing anger, reflected in attitudes towards why people are rich and why they are poor. Public opinion polls indicate that even up to 2014 a majority of people in China blamed lack of effort, lack of ability or low education as to why people were poor. Today the biggest factor is seen as unequal opportunity and an unfair economic system.
While there is still support for the CCP – which has a membership of over 100 million today – and anger tends to be directed at private sector capitalists and the West, confidence in the regime is waning. Despite the widespread use by the regime of revolutionary, socialist and Marxist rhetoric, the CCP leaders have little in common with these ideas.
Young people in particular are becoming increasingly dissatisfied with life. Many are refusing to start a family and the birth rate is falling. There were 12 million fewer 3-5 year-olds going to kindergartens in 2024 compared to 2020. Slowing economic growth and a widening gap between the elites and the majority of society, as well as demands for more freedoms, will inevitably erupt. Splits in the CCP and the Peoples Liberation Army – the guardians of CCP rule – will at a certain stage come out into the open.
Such a development could also open the floodgates towards a new revolutionary development. The building of independent trade unions and the growth of genuine socialist ideas armed with a programme for a workers’ and socialist China will be posed. China’s working class, the largest in the world, will put its stamp on events and when it does it will open up a new stage in the world socialist revolution.