Being in China during US President Donald Trump’s visit was a fascinating experience. The contrast between the official accounts of Trump’s meeting with Chinese President Xi Jinping was immediately apparent.
Trump, true to form, described the summit as “incredible” and claimed that it produced “some fantastic trade deals.” China, for its part, quickly tempered expectations, emphasising that the discussions were merely preliminary and that the two countries had agreed only to establish investment and trade boards for further, product-specific negotiations.
The differences were not merely stylistic. While the White House’s post-summit statement asserted that “both countries agreed that Iran can never have a nuclear weapon,” China’s foreign ministry made no mention of this, stressing that the war “should never have happened” and “has no reason to continue.”
Instead, both Xi and the Chinese foreign ministry identified Taiwan as the central issue, with the ministry stating that “if it is handled properly,” China’s relationship with the United States will be stable, and the two sides will be able to devote more energy to advancing mutually beneficial cooperation.” Otherwise, it warned, “the two countries will have clashes and even conflicts, and the entire relationship will be in great jeopardy.” The Trump administration’s official statement, by contrast, avoided the issue of Taiwan altogether, while Trump himself side-stepped questions about it.
But even more revealing than the official narratives was the reaction of Chinese analysts and academics. Their attitude toward what Western media portrayed as a major diplomatic event ranged from indifference to contempt. Several people I spoke with saw the visit as political theatre: a carefully choreographed exercise designed to cater to Trump’s vanity and love of pageantry. The only meaningful takeaway, in many Chinese observers’ view, was America’s implicit acknowledgement that China is now its economic and geopolitical equal.
This attitude reflects the growing— and increasingly visible—confidence among China’s political and intellectual elites, who see the country’s extraordinary economic transformation as evidence that state-led development has succeeded where liberal capitalism has failed. Over the past few decades, China has lifted hundreds of millions of people out of poverty and built sprawling networks of high-speed rail, highways, ports, and industrial infrastructure. Centralised state control, the thinking goes, has enabled China to position itself at the forefront of cutting-edge industries while also delivering stability, essential services, and rising real wages.
These achievements, in many Chinese economists’ view, stand in stark contrast to the stagnation and political dysfunction that increasingly afflict developed countries in the “free world.” To them, this is evidenced by the fact that every major global economic crisis since the turn of the century has left China relatively unscathed, if not stronger than before.
Similarly, China’s ability to chart its own economic course appears to have vindicated its “catch-up” strategy over the past three decades. That strategy has enabled China to integrate into the global economy while largely disregarding the orthodoxies of the Washington Consensus, whose policy prescriptions have often impeded industrialisation and reinforced developing countries’ dependence on global financial markets.
In contrast to many Western governments, China has also adopted a long-term approach to industrial policy. This is particularly evident in its systematic investment in renewable energy and electrification, which has significantly lowered the global cost of the green transition.
Current economic-policy discussions, invariably framed in terms of Xi Jinping Thought, increasingly emphasise the use of state planning to integrate macroeconomic management with structural, sectoral, and regional objectives. Fiscal and monetary policies—including central banking, which is not considered institutionally independent—are closely aligned with efforts to reduce imbalances between consumption and investment, as well as between regions and sectors.
Many Chinese economists now reject the conventional view that China’s relatively low consumption-to-GDP ratio is primarily the result of excessive household savings or income inequality. Drawing instead on the Keynesian idea that investment determines savings, they contend that the most effective way to rebalance the economy is to regulate the scale and direction of capital accumulation. Recent data seem to support this argument: private investment fell by 6.4% in 2025, with the real-estate sector alone shrinking by 17.2%, despite an increase in public spending. Taken together, public and household consumption accounted for roughly 52% of China’s GDP growth last year, five percentage points higher than the year before.
Some economists go even further, arguing that China still needs high levels of public investment in order to develop new industries, create better-paying jobs, and fuel consumption-led growth. According to this view, advanced economies’ relatively low investment rates are evidence not of economic maturity but of stagnation, owing to financialization and the decline of public spending on productive assets.
This argument has its merits. But it overlooks serious structural challenges, such as massive excess capacity in some sectors, reliance on exports to absorb overproduction, and the still-painful unwinding of the real-estate bubble. It also tends to downplay persistent wealth and income inequalities, as well as rising youth unemployment, which could be worsened by the very technological advances the government enthusiastically promotes. These problems may be better understood as policy failures to be learned from, rather than rationalised away.
There are other reasons for Chinese policymakers to resist triumphalism. Some argue that China’s political economy is now a dual-track system, shaped by a zero-sum struggle between a goal-driven party-state apparatus and the expansive logic of capitalism, which resists both political control and national borders. The outcome will depend as much on developments within China as on global economic and geopolitical shifts.
China’s development model of “socialism with Chinese characteristics” claims to offer an alternative to the crises and inequalities of liberal capitalism. But if socialism is understood as the progressive liberation of people from exploitation and alienation, then China must go much further. It must rethink the relationship between labour, capital, and the state.
The writer is Professor of Economics at the University of Massachusetts Amherst.