'China Shock' claim misses the point

Country's real economy a pillar of global stability, not source of crisis

Source: China Daily

Update: Sep 21th, 2026  7:59 AM

MA XUEJING/CHINA DAILY

A growing chorus in Western media has revived a familiar refrain: "the next global economic crisis could be Made in China". This latest iteration of the China threat narrative, packaged as "China Shock 2.0," misreads China's economic fundamentals and ignores the resilience of the world's most complete manufacturing system, experts and corporate executives said.

A close examination of the facts, backed by in-depth analysis and the actual behavior of global businesses, reveals a different reality: China's real economy is not a source of crisis, but a pillar of global stability, they added.

The "China Shock 2.0" thesis claims that China's rapid advances in new energy, AI and other high-tech sectors are squeezing developed economies out of higher-value segments of global supply chains. Yet this argument is little more than a repackaging of the long-discredited "China overcapacity" narrative — and scholars across continents are increasingly calling it out as a political instrument rather than a serious economic diagnosis.

Sun Chenghao, head of the US-Europe Program at Tsinghua University's Center for International Security and Strategy, described the recent Western hype around "China Shock 2.0" as "in essence a political construct". It layers together Western anxieties over lost industrial competitiveness, the rising costs of a green transition and broader strategic competition with China, he said, reframing these issues into a "security threat" narrative.

Li Jiaying, an associate research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, said "The so-called 'China Shock 2.0' is essentially a carefully constructed political narrative. It is a self-preservation tactic by certain countries facing industrial disadvantages and domestic de-industrialization, using public opinion smears and trade barriers to deflect internal contradictions."

Li pointed to a glaring double standard: German cars, French wine and US chips have long enjoyed state support yet are hailed as "benchmarks of national competitiveness", while China's tech — and scale-driven exports are branded as "overcapacity" and a result of "illegal subsidies".

Jostein Hauge, a political economist at the University of Cambridge, argued in a commentary that the "China Shock 2.0" narrative is riddled with double standards and hegemonic anxiety, while deliberately downplaying the enormous dividends China's integration into the global economy has brought to the world.

He noted that if India or the whole of Africa were to rise at the same speed and scale, the US and Europe would react similarly.

The unspoken Western rule, Hauge wrote, is that China dominating is unacceptable, but US-EU domination is fine.

Adam Tooze, a historian at Columbia University, said in an article titled "Chartbook 464: The 'China squeeze' — the politics of development counterfactuals" that the "China squeeze" narrative "bases its critique of China on a counterfactual imagining of the world".

As an account of economic history, he wrote, it "must surely be regarded as nothing short of bamboozling." The theory, he argued, is not grounded in empirical economic analysis, but rests entirely on political premises.

Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics, added that the so-called shock is simply "a natural outcome of market economics and competition." Developed countries, he said, have grown accustomed to holding the technological upper hand for decades. "Now, when they face a real competitor, they seem reluctant to embrace the free market principles they've preached for decades."

Despite all the western noises, China's manufacturing sector remains the undisputed backbone of the global economy. According to World Bank and Visual Capitalist data released in August 2026, China accounts for approximately 30 percent of global manufacturing output.

This is not a flash in the pan. China has been the world's largest manufacturing nation for 16 consecutive years since overtaking the United States in 2010, and it remains the only country with all industrial categories in the UN industrial classification — 39 major sectors, 191 medium categories and 525 subcategories, without a single one missing.

Zheng Yongnian, dean of the School of Public Policy at The Chinese University of Hong Kong, Shenzhen, offered a sharp counter to Western narratives of Chinese decline and overcapacity.

Zheng said that "what the West fears is often precisely our advantage."

He elaborated on the global significance of Chinese modernization, describing it as "open-source" — a model in which China, having developed itself, "extends the ladder" to encourage others to develop as well.

This stands in contrast to the Western approach, which he characterized as "closed-source" and "pulling up the ladder" — developing first and then removing the means for others to follow. China's capacity, Zheng stressed, is "one of the forces through which China peacefully changes the world".

Zheng also emphasized "unilateral opening-up" as China's most effective method for achieving both internal and external goals. "China, as the world's second-largest economy and largest single market, provides certainty for capital," he said, noting that China's visa-free policies, foreign manufacturing access and telecommunications opening are concrete steps in this direction. His conclusion is pointed: "Capital is the most sensitive — it votes with its feet. If you're doing well, it comes; if not, it leaves."

The data on foreign investment in China strongly reinforce this point. The Shanghai American Chamber of Commerce's 2026 China Business Report, released this month, shows that 78 percent of surveyed member companies achieved profitability in 2025 — the highest level since 2019. Fifty-eight percent of respondents expressed optimism about their five-year business prospects in China, up 17 percentage points from the previous year. Twenty-eight percent increased their investment in China last year, a four-year-high, and nearly one-third plan to increase investment this year.

Harley Seyedin, president of AmCham South China, said at the 26th China International Fair for Investment and Trade in Xiamen, Fujian province, earlier this month that 75 percent of enterprises plan to reinvest in China this year, with member companies expected to reinvest $13.79 billion in profits generated in China over the next three to five years. "This is undoubtedly a strong vote of confidence in the resilience and development potential of the Chinese market," Seyedin said.

Masaharu Nakayama, executive officer of Panasonic Holdings Corp Group, said that China's ability to innovate and roll out AI applications, paired with Panasonic's technological expertise, creates tremendous opportunities. "In our industry, China is among the world's fastest-evolving and most competitive markets. Products forged in this demanding market are globally competitive," he said.

Data from China's Ministry of Commerce further confirm this trend: nearly 4,800 foreign-funded enterprises made additional investments in China in the first half of 2026. And in the first seven months, more than 37,700 new foreign-funded enterprises were established, up 4.4 percent year-on-year. What's more, foreign investment in high-tech industries surged 32.7 percent.

Far from being a source of crisis, China has been the single largest contributor to global economic growth for years, with its contribution rate consistently around 30 percent.

This growth benefits the world. James Pethokoukis, a senior fellow at the American Enterprise Institute, noted in a December article that while China's rapid growth reduced the US share of global GDP, it simultaneously helped US consumers by making a wide range of goods cheaper and easier for US companies to produce. The US, he concluded, became absolutely richer even as it appeared relatively smaller, economy-wise.

An article of The Wall Street Journal titled "The Real Story of the 'China Shock'" further pointed out that research found for every 1 percentage point increase in imports from China, US consumer prices fell by about 1.9 percent. As the article and related analyses noted, US manufacturers using Chinese components or materials also benefit from lower input costs, making them more competitive globally. These findings directly contradict the claim that China's trade is a net negative for the United States.

Indeed, "China opportunity" is a narrative that is widely recognized and welcomed around the world. Take green energy as an example. China has consistently provided high-quality, efficient and low-carbon products to the world, especially to developing countries.

Wind turbines, solar panels — plus new energy vehicles — from China have been exported to more than 200 countries and regions, helping drive down the global cost of wind and solar power by more than 60 percent and 80 percent respectively, according to data from the Ministry of Industry and Information Technology.

Tu from the University of International Business and Economics said "China's massive, integrated production capacity, combined with intense domestic competition, allows it to produce high-tech goods at remarkably low cost. This, in fact, benefits the entire world, as it significantly lowers product prices."