Context:
As 2026 begins, China projects strategic confidence despite economic slowdown and domestic structural stress. Its assertive foreign policy, export-driven recovery model, and evolving U.S. posture present complex strategic challenges for India.
Key Highlights:
- Economic and Domestic Landscape
- China’s economic growth in 2025 remained below 5%, constrained by:
- Weak domestic demand
- Over-leveraged and overbuilt property sector
- Despite these challenges, China has reinforced tight domestic political control.
- Strategic and Ideological Direction
- President Xi Jinping has prioritised:
- National security
- Technological self-reliance
- Strengthening the “real economy”
- Focus areas include semiconductors, artificial intelligence, green energy, advanced manufacturing, and dual-use technologies.
- China is doubling down on a state-led economic model.
- Trade and Global Impact
- China’s trade surplus crossed $1 trillion in the first 11 months of 2025.
- Export-led growth is creating trade vulnerabilities for partner economies, including India.
- IMF warnings highlight risks of China attempting to “export its way out” of slowdown.
- U.S.–China–India Dynamics
- The U.S. National Security Strategy 2025 labels China primarily as an economic competitor, with strategic focus shifting to the Western Hemisphere.
- The U.S. remains committed to preventing Chinese hegemony in Asia but shows reduced emphasis on India as a counter-balancing pillar.
- This signals a phase of tactical accommodation, not full confrontation.
- India–China Relations
- 2025 saw cautious stabilisation in bilateral ties.
- Border conditions remain stable but not normal, with no resolution of structural disputes.
- Economic asymmetries continue to widen due to China’s export dominance.
- Global South and BRI Push
- China is positioning itself as a leader of the Global South.
- Expansion of Belt and Road Initiative (BRI) projects continues.
- However, concerns persist over debt sustainability and financing fatigue.
Relevant Prelims Points:
- Technological Self-Reliance: Reducing dependence on foreign technology inputs.
- Grey-Zone Tactics: Coercive actions below the threshold of conventional war.
- Asymmetric Deterrence: Leveraging non-conventional strengths against a stronger adversary.
Relevant Mains Points:
- China’s export-heavy recovery model poses systemic trade risks for India.
- India faces pressure to respond to economic coercion and grey-zone strategies.
- Reduced U.S. strategic reliance on India necessitates greater self-reliance in defence and technology.
- Leadership claims over the Global South intensify normative competition.
- Way Forward
- Strengthen asymmetric deterrence across military, cyber, and economic domains.
- Accelerate domestic industrialisation and technological capability building.
- Reduce trade dependence through selective decoupling and resilient supply chains.
- Enhance strategic partnerships while safeguarding strategic autonomy.
UPSC Relevance:
GS Paper II – International Relations
GS Paper III – Economy, Security, Technology