Table of Contents

Chinese leaders view globalization through the ideological prism of Marxism as a historical process largely equated with Westernization. Having won the Cold War, the United States and Europe set out to impose their political systems and economic development models on the world, using economic globalization to promote democratization.

Because capital-driven globalization emphasizes production rather than distribution, it is not only leading to growing economic and social inequality within Western countries but also hurting the interests of most developing nations. Some countries that suffer from a scarcity of natural resources and a disadvantageous geopolitical location have long been left on the periphery of global development, and some have even become breeding grounds for extremism and terrorism. What is more, under the influence of neoliberalism, the goals of globalization have come to include the elimination of government regulation and a weakening of the role of the state. The Washington Consensus has led to blind faith in the invisible hand of the market, and many governments have become increasingly dysfunctional.

Since the Eighteenth National Congress of the Chinese Communist Party in 2012, China’s leaders have placed an increased emphasis on global governance issues, arguing that China has a responsibility to usher in a rebalancing of globalization. Beijing is concerned about growing populism in the United States and Europe and the surge of far-right political forces that are against globalization, immigration, and multilateralism. The arrival of Donald Trump in the White House was a major event in this development. Some people see China as the enemy and have grouped it together with the globalist elite in the West. In many ways, deglobalization has largely degenerated into “de-Chinaization.”

The Chinese leadership believes that the world needs a new type of globalization that embraces more non-Western elements. China’s Belt and Road Initiative (BRI) is an important platform for promoting this new globalism. By fostering trade and infrastructure as well as financial and cultural interconnections, the BRI is expected to enable more countries to participate more deeply in the globalization process.

However, the emergence of the coronavirus pandemic dealt a serious blow to China’s ambition to lead globalization reforms. The outbreak has exposed China to accusations from the United States and other Western countries that it spread the virus. Meanwhile, European nations, Japan, India, and other countries have tried to reduce their dependence on China in their supply chains. Even under the outward-looking administration of U.S. President Joe Biden, the United States continues to push for a managed decoupling to ensure the security of its supply chain, and Biden has stated that he sees China as America’s “most serious competitor.”1 This strategic competition between the United States and China is causing Beijing to reexamine the international environment facing it in the coming decades.

Minghao Zhao
Minghao Zhao is a senior fellow at the Center for American Studies in the Institute of International Studies at Fudan University in Shanghai.

Currently, most Chinese strategists believe that continuing to embrace globalization is not only a necessary approach for China to ensure prosperity and stability but also a powerful weapon to counter the pressure of great power competition from the United States. Beijing has adopted a two-pronged strategy of continuing to advocate globalization while putting an increased focus on securing its own development.

The theme of globalization provides a fascinating insight into China’s evolving role in international governance. On the one hand, Beijing wants to create norms and rules to regulate the policy space at the domestic level in line with the priorities of the Chinese Communist Party. In that scenario, some measures of domestic governance become totally dissociated from the norms of international governance. On the other hand, as part of its diplomatic campaign to enhance its soft power, China also wants to champion the rights of a range of developing countries interested in shaping existing global norms to their advantage. It is the interplay between these two contradictory objectives that ultimately determines the conduct of Chinese policymakers.

The Global Trade Agenda

Chinese President Xi Jinping is a proponent of free trade and globalization. In his speech at the 2015 Group of Twenty (G20) summit in Turkey, he remarked,

The trend of the world economy in recent years shows that in the age of economic globalization, no country can prosper in isolation. Coordination and cooperation is the only viable choice. Members of the G20 are all major economies. Together, we represent over 80% of the global economy, and naturally carry greater responsibilities for global growth. Therefore, we must and, in fact, can be more proactive in our actions.2

While China supports international trade, the government believes that globalization has not been particularly well managed because of some countries’ overreliance on the free market and private enterprise as well as excessive tax cuts. The Chinese government views state intervention as an important mechanism to ensure that globalization can improve the redistribution of wealth.3 Unfettered market forces tend to monopolize benefits, and if the government does not intervene, serious imbalances will occur. Beijing also views Western countries’ use of tax cuts to spark economic growth skeptically. These two forces have led to backlashes against globalization and free trade in the West, and China is determined to expand global trade while keeping inequality in check.

China’s Vision of Globalization

Chinese leaders are cognizant of the negative aspects of globalization, but they are eager to address the issue by enhancing international cooperation. The Chinese government’s 2019 white paper “China and the World in the New Era” stated that problems encountered in globalization can be fixed.4 Countries should collaborate to learn from their historical experiences, improve governance, and promote a new type of globalization that is open, inclusive, balanced, and beneficial to everyone.

Beijing believes a new era of globalization should continue to uphold the rules of trade liberalization and the multilateral trading system, which have proved effective. The concepts of extensive consultation, joint contributions, and shared benefits should be maintained to build an open world economy, promote global peace and stability, and try to reach common development and prosperity.

China’s government is intent on better managing globalization so that it benefits citizens and not just large multinational companies and wealthy people. China believes in the effectiveness of multilateralism and views the future of globalization as a communal project in which all governments can work together to strengthen the supervision of the market and guarantee the fair distribution of income.

Wenxiang Zhao
Zhao Wenxiang is a tax partner at SGLA Law Firm in Shanghai.

Xi outlined this approach at the 2016 G20 business summit in Hangzhou, where he argued that global governance must focus on creating an efficient, fair, and equitable financial governance system, improving multilateral trade structures, and promoting international trade and investment opportunities.5 Xi implored all countries to work together to improve international governance to implement the United Nations (UN) 2030 Agenda for Sustainable Development.

The Chinese government is also committed to promoting economic integration and building an open global economy. At the same G20 business summit, Xi reiterated the importance of solidifying free trade in the Asia-Pacific region as well as improving the openness and inclusivity of free-trade agreements to protect and expand the multilateral trade system.6 However, he also explained that governments should play an active role in guiding the direction of globalization to ensure the fair distribution of resources and the sustainability of globalization processes. Through this approach, the global public will come to view globalization favorably, as people will see how their participation in international trade fuels improvements in living standards.

Beijing believes that open regionalism is the correct way to deal with the centrifugal forces caused by globalization. In China’s view, since the prospects of concluding negotiations for an open global trading system are slim, plurilateral and regional agreements should play a larger role going forward. China was one of the main drivers of the Regional Comprehensive Economic Partnership (RCEP), which was concluded in November 2020 among fifteen countries that together make up around 30 percent of global trade and are home to over 2.3 billion people.7 Beijing views itself as a key country defending the global trade regime and believes that large free-trade agreements such as RCEP will be increasingly important for global prosperity.

China also remains interested in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade pact that was originally designed to exclude Beijing, and is taking the necessary steps to gain admission to the agreement. The government is aware of the need to be careful not to turn these regional organizations into closed groups, because only openness can best promote human progress and communication.

Special Treatment, Intellectual Property, and Dispute Settlement

Since China is still a developing country by most measures, Beijing believes it deserves to maintain this status in the World Trade Organization (WTO) and has pushed back on U.S. demands to reconsider China’s status as a developing country. Ideally, China would like to see another clause on emerging economies added to WTO agreements. This clause would ensure that while benefiting from some special treatment, emerging economies commit to gradually reducing their reliance on such treatment over a five- to ten-year transition period.

While China is qualitatively different from many other developing countries in terms of both economic size and complexity, Beijing believes that the best method to guarantee an equitable global trading system is to protect developing countries through the WTO’s principle of special and differential treatment (S&DT).8 Given its commitment to S&DT, China will likely continue to support other developing countries in the WTO on this issue.

Yifan Ding
Ding Yifan is a chair professor at Beijing Foreign Studies University.

The Chinese government believes that protecting intellectual property rights (IPR) is important to spur technological and scientific innovation and promote economic development. Beijing also sees IPR protections as necessary to engage in scientific, technological, economic, and cultural exchanges with other countries. In a speech at the 2019 World Economic Forum in Davos, Xi detailed his commitment to IPR safeguards.9 The following year, the Chinese government published an IPR white paper that set out Beijing’s policies to better protect intellectual property.10

While China has been accused of poor IPR regulation in the past, it has enhanced protections by amending its laws. Some analysts have predicted that as Chinese innovation continues to improve, its IPR safeguards—as well as broader support for global IPR regimes—will likely keep pace to ensure that China-based companies realize their due profits.

Finally, China strongly supports the WTO’s dispute settlement mechanism, which Beijing believes is critical to ensure the organization’s proper functioning. Without an operational, respected dispute resolution system, members would lack incentives to properly implement their obligations. During its WTO membership, China has not questioned the dispute rulings of the organization’s panels or Appellate Body. China has lost several cases in the WTO but it has respected the rulings, as Beijing believes the decisions are objective and fair.

Data and Technology Governance

China’s digital economy has grown rapidly in recent years, expanding from 2.6 trillion yuan ($407 billion) in 2005 to 35.8 trillion yuan ($5.6 trillion) in 2019, and increasing from 14.2 percent to 36.2 percent of the country’s gross domestic product (GDP) over the same period.11 According to the Fourteenth Five-Year Plan, which charts China’s development course for 2021–2025, the digital economy is expected to account for around 10 percent of China’s newly added economic output by 2025.12

As the key driving factor of this new economy, data require proper governance and mature mechanisms to govern their use and release their value. Despite the rapid development of the digital economy, however, China lagged behind in data governance until the second half of the 2010s.

Domestic Developments

In contrast to the international community, which began to establish relevant systems to govern the protection of personal information in the 1970s, China first clarified its basic rules on safeguarding electronic personal data in 2012.13 Beijing accelerated its efforts afterward, including through its 2016 cybersecurity law and 2021 personal information protection law. China’s contribution to the rising proportion of the global population whose personal data are protected is undoubtedly significant: that proportion is expected to grow from 10 percent in 2020 to 65 percent in 2023.14

Lyu Jinghua
Lyu Jinghua was a visiting scholar with Carnegie’s Cyber Policy Initiative. Her research focuses primarily on cybersecurity and China-U.S. defense relations.

As a continuation of earlier legislation, China’s 2021 data security law defined more clearly and comprehensively the obligations of entities that carry out data activities. The law’s most eye-catching provision is that organizations and individuals outside China that conduct data activities in the country are subject to the law—though the legislation clarifies that this applies only to data activities that may harm China’s national security, its public interest, or the rights of Chinese citizens.15

Despite advances as a result of these efforts, potential problems at the domestic level are evident. For one, a lack of clear requirements on the quality of public data has led to differing data quality and inconsistent standards across government departments and local administrations. Another issue is that data quality management and assessment mechanisms are not yet mature, which hinders the application, sharing, and development of enterprise data. A further aspect that deserves close observation is the balance China will strike between further stimulating the innovation of internet enterprises and effectively regulating the monopolistic practices of internet giants.

International Models

At the international level, most Chinese scholars are watching closely the different governance models being developed by the United States and the European Union (EU). The United States, with its leading position in the digital economy, is creating a model that aims to combine market competition with privacy protection. This model is built on a belief in the power of technology and the protection of business interests and encourages the open sharing and free flow of data. The EU, meanwhile, with its focus on privacy as an end in itself, is constructing a governance system based on advanced data protection rules. This system aims to combine privacy provisions with the free flow of all kinds of data within the EU, so that data protection may serve the bloc’s strategy of building its digital market.

The differences between these two systems are closely related to the scales of the two entities’ digital economies, their overall development strategies, and their historical and cultural backgrounds. Thus, although China has learned lessons and adopted some practices from the United States and the EU, it will choose a different approach with its own features.

Wei He
Wei He is a China economist at Gavekal Dragonomics.

Chinese scholars have also expressed concern about the so-called clubification of cyber governance, which refers to the division of the world into two separate systems, with countries forced to bring their regulations into line with either the U.S.-led Cross-Border Privacy Rules system or the EU’s General Data Protection Regulation.16 Those countries that endeavor to avoid joining either scheme might be excluded from the global data network, although interdependence is supposed to be the inevitable result of data flow and sharing.

The driving force behind this trend, as argued by Shen Yi, a professor at Fudan University, is that some developed countries base their data governance models on the principle of “sovereignty of the first mover,” emphasizing hard power and favoring “freedom of action.”17 Given the varying strengths of different countries, the order eventually created, regardless of its form and procedures, will be characterized by hegemonism. In contrast, a model that views the digital domain as the common property of humankind can be more beneficial to most countries, especially those lagging behind, because it emphasizes that a certain share of the new domain should be reserved for all countries. Shen argues that China’s 2020 Global Initiative on Data Security is based on the latter approach.

Further Steps

In terms of concrete measures, Chinese scholars generally emphasize that the UN should lead in promoting the formation of a global data governance platform by carrying out multilateral negotiations, creating consultation mechanisms, and coordinating the data interests of countries and regions. Regional organizations, meanwhile, should work within the UN’s overall governance framework and take advantage of close cooperation within their regions to create more refined and concrete implementation plans for data governance.

China continues to launch new data governance initiatives. On the one hand, China has issued two new laws on personal information protection and data security.18 Together with existing cybersecurity and national security laws, this legislation forms a comprehensive governance framework in the data sector. On the other hand, China is working to promote data-sharing programs at the regional level. These efforts center on signing RCEP and the China-EU investment agreement that the two sides finalized at the end of 2020 and, once this is done, seeking negotiations on joining the CPTPP. Beijing will also work to promote openness and cooperation in the use of data among the countries in the BRI.

Jodi-Ann Wang
Jodi-Ann Wang is a researcher focusing on China’s approach to climate change and the green transition.

It remains to be seen whether China’s data governance model can address its inherent deficiencies, whether it can serve as a template for other countries that are lagging behind in digital technologies, and to what extent it can be replicated through regionalized cooperation. The answers to these questions will have direct and significant impacts on global data governance processes.

Global Rules on Taxation

During the early stages of China’s reform and opening-up period in the late 1970s and early 1980s, Beijing relied primarily on foreign investments to fuel growth, making China a largely capital-importing country. For international taxation purposes, China tended to formulate its tax policies and regulations on cross-border transactions from the perspective of a source country, hoping to maximize revenues from these transactions.

However, after the growth of Chinese investments in other countries, China began to shift its perspective on international taxation and has adjusted its tax laws to reflect its status as a capital-exporting country. In a sign of this shift, China has embraced the UN Model Double Taxation Convention Between Developed and Developing Countries and started to use the taxation model of the Organization for Economic Cooperation and Development (OECD) to revise its tax treaties with other jurisdictions. Beijing has also begun to participate more actively in OECD-led international tax reform. Put simply, as a country that has been both a capital importer and exporter, China has held a neutral, open-minded, and pragmatic attitude toward the international taxation regime.

No Firm Stance on Digital Taxation

China, like many other countries, is well aware of the disruptive effects of the digital economy on international taxation norms. Given the need to balance its national interests with those of the global taxation regime, the Chinese government continues to follow this issue closely.19 However, to date, the Chinese government has not stated a clear official stance on international taxation of the digital economy, likely for two reasons.

First, the full impact of the digital economy on international taxation norms is not yet fully understood. The world’s major economies, such as the United States and the EU, must further coordinate their approaches to this issue. Because the international community has not yet come to a consensus on important aspects of reforming the international tax regime, China has consistently maintained a cautious attitude and chosen to refrain from publicly taking a solid position.

Second, given the uniqueness and complexity of China’s digital economy, the Chinese government is in no rush to make its position known. On the one hand, along with other countries that are attempting to tax the global digital economy, China already has a significant digital marketplace. On the other hand, China is home to many of the world’s largest internet companies. However, in contrast to U.S. internet firms, whose share of the European market is relatively large, Chinese companies have a much smaller share of the global market because of language issues, economic security concerns, and other worries. As a result, international taxation of the digital economy is not an urgent preoccupation for Beijing.

OECD and UN Proposals

At present, the OECD is leading efforts to reform the international tax system. Although developing countries, such as China, participate as observers in some OECD committees and working groups, most of the organization’s members are developed countries. If the overall aim of a multilateral platform is to communicate and consult on reform of the international tax system, China would likely view the UN, with its broader membership and greater representation, as a more suitable choice. Compared with the OECD reforms, China believes the UN’s proposed amendment to the UN model convention for the taxation of digital services has the advantage of being easier to integrate into the international tax order as it is based on existing rules.20 However, the disadvantage of the UN proposal is that it is a transitional scheme that applies only to part of the digital economy. It does not cover new types of business, which are included in the OECD plan on base erosion and profit shifting—the practice of exploiting gaps in fiscal rules to avoid paying tax.21

The greatest achievement of the OECD proposal is that it puts forward an international taxation framework that gives market countries new taxation rights and establishes a global minimum corporate tax rate. These are major, innovative changes to the existing international tax order. China believes the main shortcomings of the OECD proposal are that it is very broad and aims to change many things. This means that implementing it will require various sets of accompanying administrative rules.

From China’s perspective, the most significant obstacle to reaching multilateral taxation agreements is the need to coordinate and balance the interests of countries at different stages of development. For example, on the topic of how to tax the digital economy, the United States and Europe are both highly developed, yet even they are clearly divided on this issue. Meanwhile, as China is both a digital consumer market and a digital exporter, it has to strike a balance between fair taxation and the creation of a competitive market environment. Beijing believes it will be very difficult for developing and developed countries to overcome their different interests to strike multilateral taxation agreements.

The Global Financial System

The challenges for the international financial system have become more apparent during the coronavirus pandemic. At the same time, the spillover effects of the extremely relaxed monetary policy of the U.S. Federal Reserve have worried Chinese officials and economists. The March 2020 U.S. dollar crunch revealed how the financial systems of many countries, including China, have come to depend on the United States.

Approaches to Reform

Some Chinese experts have argued for more aggressive and radical reform of the financial system, while others endorse a more gradual approach.22 Among the former group, some Chinese voices are calling for the establishment of a global central bank through the merger of existing international financial institutions.23 Any new such bank would have the right to act as lender of last resort to the world and draft unified regulations that all countries would obey. Correspondingly, the creation of a global central bank would make a unified international currency possible, and the International Monetary Fund’s (IMF’s) special drawing rights (SDRs)—an international reserve asset that supplements members’ official reserves—could be further developed to fulfill this role. Yet, such radical reform, despite its advantages, would be difficult to realize, given the political pressures it would face.

Indeed, China believes its best interest for now is not to radically restructure the whole international financial system, because the political and economic costs would easily outweigh the benefits at this stage. In the foreseeable future, China is likely to continue to increase its influence in the system through more participation in institutions including the IMF and forums like the G20. Beijing can be expected to push some reforms of the existing system in line with its interests. These moves do not require—and will not result in—dramatic change in the powers and responsibilities of the current institutions.

China’s actions will likely start with efforts to push for reform of the distribution of voting quotas in the IMF. It is widely recognized that the fund’s current quotas do not fairly represent the changing picture of the world’s economies, as emerging-market countries have much less power than their rapid economic growth would imply. Beijing believes that larger voting quotas would allow China and other emerging-market countries to better voice their demands.

One of the fundamental problems faced by emerging markets is the spillover effect of the excess liquidity created by the central banks of developed nations. Emerging markets have learned the lessons of their abuses of fiscal policy in the late twentieth century to cope with rising capital inflows by introducing more borrowing discipline and macroprudential measures. In doing so, emerging markets eliminated one source of instability in the international financial system, and today’s major instabilities come from developed nations. In a way, the abuse of monetary policy in the developed world is similar to the late-twentieth-century fiscal practices of emerging markets, and the negative spillover impact of such monetary policies is not yet fully understood.

Theoretically, international financial institutions should take responsibility to prevent developed nations from engaging in overexpansionary monetary policies, which create imbalances in the global financial system. However, this is not doable without reform of the quota system, so it is in the interests of China and other emerging markets to continue to push for this reform, which has been delayed for a long time.

Currency Concerns

China and many other countries view the dominance of the U.S. dollar as a potential danger to the international financial system. In 2020, the danger was alleviated by support from the U.S. Federal Reserve and strengthened coordination among central banks. To cope with the risk of a future dollar crunch and reduce China’s reliance on the United States, Beijing can try to empower the IMF so that the institution has more core funding and can shoulder more responsibility when facing dollar liquidity crises. But the IMF is unlikely to become totally independent and is still highly subject to U.S. pressure.

The alternative is to strengthen a regional financial safety net, such as by building a currency swap net to alleviate dollar pressures. China will work to strengthen regional safety nets rather than enable a more centralized international financial system. Beijing’s support for the New Development Bank, established in 2014 by China together with Brazil, Russia, India, and South Africa in the BRICS format, is one such example.24 These regional arrangements can also help alleviate liquidity pressures when needed and boost China’s influence in specific regions. However, given the status of the U.S. dollar and the role of the United States as the ultimate dollar provider, these methods cannot fully eliminate potential dollar pressures. In other words, emerging markets and other countries might be better off in terms of financial safety if the status of the dollar weakens.

This situation will require China to continue to push its renminbi globalization strategy, which it views as an important element of its grand strategy. A global role for the Chinese currency could come with the promotion of SDRs, as the renminbi has been included in the basket of currencies that determine the SDR’s value. But China will more likely continue to open up and gradually let the renminbi’s attractiveness rise, enticing more investors into holding renminbi or renminbi-denominated assets. Beijing is willing to see the reserve currency system become more diverse, with the renminbi playing a larger, more important role. However, this cannot be done immediately and will take time.

The Climate Change Agenda

Given the vast size of China’s economy, population, and land, the country’s climate actions play a decisive role in the international commitment to limit global warming to 1.5 degrees Celsius above preindustrial levels. Although China’s per capita emissions are lower than those of many advanced industrializing nations, its cumulative carbon emissions accounted for over one-quarter of the global total in 2019.25 China’s economic rise over the past decades was achieved largely through coal-fired power, but now, the country has risen to become the world’s biggest investor in green energy, specifically solar and wind power, having achieved indigenous production capabilities in these technologies.26

Since Xi took power in 2013, China has made rigorous pledges to mitigate climate change. Beijing aims to reach peak carbon emissions before 2030 and achieve carbon neutrality by 2060.27 China’s long-expected national emissions-trading scheme (ETS) became formally operational in July 2021, further demonstrating the country’s willingness to implement climate policies integrated with market-based mechanisms in transitioning toward carbon neutrality. Overall, Xi’s commitment to green development has been pivotal and future oriented, and he has stated that China must “say no to shortsighted approaches of going after near-term development gains at the expense of the environment.”28

Ecological Civilization

Former Chinese president Hu Jintao first used the idea of ecological civilization in 2017 to describe China’s brand of environmentalism. With the aim to promote “harmonious coexistence between human and nature,” the Chinese Communist Party refers to this concept as a new, socialist framework of sustainable development with Chinese characteristics.29 With Xi’s ascent, Beijing has enshrined ecological civilization as a national strategic priority and a philosophical principle that underpins the country’s pursuit of green development.30

Practically, ecological civilization entails a holistic approach that requires advancing green and low-carbon energy, achieving greener economic and social development, conserving ecological resources, implementing the strictest possible systems for environmental protection, and developing eco-friendly growth models and ways of life. China sees the potential synergy of sustainability and economic growth and recognizes the green transition as pivotal for transforming its growth model. In constructing an ecological civilization, the main economic focus has been on pursuing supply-side structural reform toward an innovation-driven, green economy and mobilizing green finance to spur the development of clean energy industries. Similarly, in China’s 2021 white paper on development, green infrastructure and digital technology emerged as strong priorities.31 In Xi’s words, ecological civilization is “vital for sustaining the development of the Chinese Nation.”32

Importantly, ecological civilization not only aspires to meet current economic development needs but also recognizes the wants of future generations. Furthermore, the concept stresses the value of climate justice as part of China’s commitment to “building a shared future for all life on Earth.”33 The centrality of collective action underlines the Chinese Communist Party’s stance on global environmental governance.

China has increasingly espoused the principle of “common but differentiated responsibilities” for developed and developing countries in mitigating and adapting to global warming.34 As the largest developing economy and a champion of South-South cooperation, China believes that advanced industrialized nations should pay compensation to developing countries for their historical emissions. This perspective aligns with the United Nations Framework Convention on Climate Change and the 2015 Paris Agreement.

Specifically, China identifies rich nations’ obligation to support developing countries in overcoming the green transition.35 Over the past two decades, China has increasingly called on rich countries to pay their debts and show more sincerity in reducing their emissions, extending finance, and allowing flexibility for developing countries to emit in accordance with their needs for green socioeconomic development.36 Xi’s address at the April 2021 Leaders’ Summit on Climate convened by Biden further accentuated China’s stance on the developed world’s responsibilities:

Developed countries need to increase climate ambition and action. . . . They need to make concrete efforts to help developing countries strengthen [their] capacity and resilience against climate change, support them in financing, technology, and capacity building, and refrain from creating green trade barriers, so as to help developing countries accelerate the transition to green and low-carbon development.37

Global Climate Financing

While calling on the developed world to raise its ambition, China has also taken actions on South-South cooperation to address the gap in global climate financing for adaptation in developing economies. The Chinese government actively acknowledges the disproportionate impacts of climate change. In offering support to alleviate these impacts, China prioritizes least developed countries, such as African nations and small island states. In 2015, ahead of that year’s Paris climate summit, Xi established the China South-South Climate Cooperation Fund to provide 20 billion yuan ($3.1 billion) to support developing countries in tackling climate change.38 At the summit, Xi elaborated on his commitment to the 10-100-1,000 initiative, through which China would establish ten low-carbon industrial parks, one hundred climate mitigation and adaptation projects, and 1,000 training opportunities on climate change in thirty-four developing countries.39

These commitments came after a series of cooperation projects with Southern countries, such as a three-year 200 million yuan ($31 million) climate project with small island countries, launched in 2011.40 Beijing has signed over ten memorandums of understanding with developing countries to deploy energy-saving and low-carbon products and organize capacity-building training.41

The coronavirus pandemic, which has intensified a brewing debt crisis in the developing world, has also widened the global climate funding gap. Although China has not put forward concrete actions to address this growing inequity in a post-coronavirus world, Beijing’s January 2021 white paper on international development cooperation made numerous mentions of climate change and foreign assistance.42 The longest chapter of the paper highlighted China’s ambitions of green development cooperation through investments in biodiversity protection, climate change mitigation and adaptation, the curbing of desertification, and the conservation of marine and forest resources.43

In a series of multilateral forums since the start of the pandemic, Xi has made clear the need for global solidarity on green development in a post-coronavirus world.44 At the September 2020 UN General Assembly, Xi advocated the collective pursuit of an innovative, coordinated, open, and inclusive green recovery of the world economy.45

Toward a Green Transition

China’s low-carbon transition acts as a key driver of growth for the country by enabling economic upgrading to help promote industrial transformation, creating employment opportunities in the renewable energy sector, and ensuring energy security while reducing China’s dependence on fossil fuels.

Beijing’s adoption of an ETS to propel the green transition underscores its confidence in the relative feasibility of market-based mechanisms to urgently reduce carbon emissions. In its current initial phase, China’s ETS covers more than 4.5 gigatons of carbon dioxide from 2,225 power companies, which account for approximately 40 percent of the country’s carbon emissions.46 The ETS began by covering only the power sector but is slated to expand to the industry and aviation sectors by 2025. This expansion will make the scheme account for roughly 80 percent of domestic carbon emissions and 12 percent of global carbon emissions.

The Fourteenth Five-Year Plan supports environmental conservation in two ways. First, it increases transfers of payments by the central government to create a market-based system of ecological compensation. Second, it establishes a system for realizing the value of ecological products by implementing market pricing for environmental protection and restoration.47

Climate change poses multifaceted, pressing, and long-term challenges to countries around the world. Global society learned in 2020 that it is capable of changing rapidly when collective survival is at stake. China has declared an understanding of its pivotal role in forging the global transition, given not only its status as the largest developing country and the world’s biggest emitter in absolute terms but also its commitment to multilateral, open, and inclusive foreign relations. As such, the pace of China’s decarbonization and deployment of renewable technologies has deep implications in managing the outcomes of climate change. In describing the climate crisis, Xi referenced the Chinese axiom “When people pull together, nothing is too heavy to be lifted.”48 It remains to be seen to what extent global actors, including China, can do the heavy lifting needed to meet the climate challenge.


Chinese policymakers’ thinking on globalization reform is shaped by two conflicting objectives. The first and clearly more important aim is to establish a legal and regulatory environment that reflects the political priorities of the ruling party. This is demonstrated in the governance of digital technologies and, to a lesser degree, in financial regulation. In such cases, Chinese authorities have shown little interest in the second objective: shaping a regulatory environment that is compatible with international norms. Beijing’s involvement in global rules in these areas therefore remains limited.

By contrast, in policy areas where domestic political priorities provide for malleable international diplomacy, China has demonstrated a real willingness to become an influential actor in shaping global norms. In some of these areas, like climate change and reform of the Bretton Woods system, China has discovered the utility of being the lead nation of a political alliance that defends the interests of the developing world against a global system that favors the political, economic, and commercial interests of the West.


Minghao Zhao is a senior fellow at the Center for American Studies in the Institute of International Studies at Fudan University in Shanghai.

Zhao Wenxiang is a tax partner at SGLA Law Firm in Shanghai.

Ding Yifan is a chair professor at Beijing Foreign Studies University.

Lyu Jinghua is director of the Northeast Asia Program at the Center for Humanitarian Dialogue.

Wei He is a China economist at Gavekal Dragonomics.

Jodi-Ann Wang is a researcher focusing on China’s approach to climate change and the green transition.


1 “Remarks by President Biden on America’s Place in the World,” White House, February 4, 2021,

2 “Innovative Growth That Benefits All,” Chinese Ministry of Foreign Affairs, November 16, 2015,

3 Ibid.

4 “Full Text: China and the World in the New Era,” Chinese State Council, September 27, 2019,

5 “Keynote Speech by H.E. Xi Jinping, President of the People’s Republic of China, at the Opening Ceremony of the B20 Summit,” Chinese Ministry of Foreign Affairs, September 3, 2016,

6 Ibid.

7 Robert Ward, “RCEP Trade Deal: A Geopolitical Win for China,” International Institute for Strategic Studies, November 25, 2020,

8 Amanda Lee, “China Refuses to Give up ‘Developing Country’ Status at WTO Despite US Demands,” South China Morning Post, April 6, 2019,

9 “Full Text of Chinese Vice President’s Speech at 2019 WEF Annual Meeting,” Xinhua, January 24, 2019,

10 “2020年中国知识产权保护状况” [The State of Intellectual Property Protection in China in 2020], China National Intellectual Property Association, April 25, 2021,

11 “Digital Economy Development in China (2020),” China Academy of Information and Communications Technology, July 2020,

12 He Wei, “Digital Economy to Account for 10% of Fresh Output in Nation by 2025,” China Daily, March 16, 2021,

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