Vladimir Shopov
When Chinese leader Xi Jinping tabled his proposal for a “dual circulation” policy in 2020, many saw this economic strategy as export-led isolationism. The policy bore fruit: by 2025 China had a $1.2trn trade surplus and included visible, loan‑fuelled megaprojects such as the Belt and Road Initiative. However, Beijing’s approach is now subtly changing. It is moving towards a more diffuse, company‑centred strategy that quietly embeds Chinese firms and value chains across sectors in other countries. That can create new long‑term leverage for China that the EU is currently ill‑equipped to handle.
Old model meets resistance
Up until now, China has focused on acquiring stakes in foreign companies and handing out easy loans, with very few obvious conditions attached, to gain footholds overseas. The plan was successful but it began to cause concern, especially in Europe. For example, when the Chinese company Midea bought the German robotics firm Kuka in 2016, it raised alarm in Berlin and subsequent German governments tightened the rules for foreign investment. The expansion of Chinese loan programmes also attracted attention. One high-profile example was Sri Lanka, which was forced to lease a key seaport to Beijing because it could not service its debts. These kinds of cases fuelled fears that China was using “debt‑trap diplomacy”—offering attractive loans that later leave countries so indebted they have to give up strategic assets or political leverage. As a result, many countries scaled back or reconsidered Chinese loans and commitments.
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