China's Economic Evolution: From the World's Workshop to Global Value Chain Dominance
China is on track to record new trade surplus records this year, including against the United States (US) and the European Union (EU). This phenomenon emerges amidst intensive efforts by Western nations to curb Beijing’s industrial strength through tariff policies. However, recent data suggests that Western protectionist strategies may have failed to confront the new reality of China’s economy.
The failure of Trump’s tariff policies and European protectionist efforts are often linked to strategic sectors such as electric vehicles (EV). However, the pressure experienced by the West is actually much broader, extending into lifestyle industries such as athletic footwear.
For example, Nike, one of the winners of the globalisation era, is now experiencing a decline in share value of up to three-quarters from its 202-peak. Nike’s problems in China are exacerbated by the rise of local brands such as Anta and Li-Ning.
To understand what is actually happening, we must distinguish between two economic entities operating in China. Ironically, China has long emphasised this distinction. In 2017, former Premier Li Keqiang noted that 74% of China’s goods surplus with the EU came from processing trade. The primary benefits actually flowed to Western multinational corporations.
Beijing’s ‘dual circulation’ doctrine aims to eliminate strategic dependence on foreign-controlled supply chains. China is not seeking autarky (total self-sufficiency without trade), but wants to ensure that its citizens no longer depend on Western brands and technology.
However, this process of emancipation is not cheap. To possess the entire value chain, China must independently finance capital, technology, and intellectual property. This explains the scale of massive subsidies, cheap credit, and financial support provided to companies projected to become national champions.
The current competition is not merely between China and the West, but between the old and new supply chain models. Large companies such as Nike or Western automotive giants built extraordinary networks of factories and logistics over decades. However, this massive scale often makes them bureaucratic and less competitive.
On the other hand, new competitors like Hoka have emerged, capable of leveraging the global manufacturing ecosystem without bearing heavy corporate burdens. Chinese companies are now doing the same, but with full control over their own supply chains.
If this trend continues, China’s swelling trade surplus is not merely a sign that they are selling more goods, but evidence that Sinochain is gradually beginning to replace the long-established dominance of global Western companies.