China's economy has undergone a remarkable transformation over the past 70 years, catapulting the country from its predominantly rural roots to a vibrant, urbanized industrial powerhouse. After the communists took control in 1949, the state exercised tight control over the economy. It was only after a series of transformative reforms initiated in 1978 that an entrepreneurial spirit was unleashed and propelled the country to become the world’s second-largest economy, with an annual growth rate that soared from 6.5% for the first 30 years to nearly 10% for the last 40.

Today, China faces binding constraints including unfavorable demographics, elevated debt levels, a productivity slowdown and rising income inequality, all at a time of rising geopolitical tensions. President Xi Jinping’s measures to reassert state control in economic planning mark a significant departure from the previous four decades of reforms and signal a shift away from the reform-driven tailwinds for private enterprises. The introduction of these new controls comes at a crucial time. Western governments and businesses are actively exploring alternatives to their Chinese suppliers to mitigate risks associated with relying on a single country. The tensions between the West and China have worsened due to Beijing’s increasing assertiveness on the global stage, including its efforts to control key technologies, its military expansionism and its territorial claims over Taiwan.

The paper takes a closer look at China's past, present and future, its transition from poverty under Marxist policies to a global powerhouse today, and its ongoing attempt to navigate the complex intersection of economic, technological and geopolitical realities to achieve its goals.

RISK CONSIDERATIONS
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