How China Misperceives Itself

Sunset in front of the Forbidden City, Beijing, May 2026 Maxim Shemetov / Reuters FRANCESCA GHIRETTI is Director of the Economic Security and Resilience Initiative and Research Leader for China and Economic Security at RAND Europe. More & Download Print unlock this feature or Sign in. Save Sign in and save to read later Copy This is a subscriber-only feature. or Sign in. Chicago MLA APSA APA Chicago Cite not available at the moment MLA Cite not available at the moment APSA Cite not available at the moment APA Cite not available at the moment Request reprint permissions here. Xi has been equally blunt about China’s technological vulnerabilities. Since 2016, when China’s 13th Five-Year Plan and other policy documents signaled the leadership’s renewed emphasis on the long-standing objective of promoting domestic innovation, Xi has repeatedly warned that China’s “key and core technologies are controlled by others.” He has identified advanced semiconductors, industrial software, and precision manufacturing equipment (such as lithography machines) as strategic chokepoints. External assessments a constraint on China’s technological advancement. Beijing has been moving aggressively to mitigate its vulnerabilities through measures including state subsidies and targeted industrial policy support for strategic sectors, and it has expanded incentives for universities and firms to invest in research and development. China also established state-backed funds to finance its technological aspirations and, where feasible, sought to diversify supply chains and reduce reliance on imports. China’s leadership is aware of the country’s vulnerabilities. Recent party communiqués show a growing willingness to name vulnerabilities that leaders previously ignored or downplayed. The 15th Five-Year Plan, which sets the country’s policy plans through 2030, reaffirms the need to address three key risks: the protracted real estate downturn, excessive local government debt, and fragile financial institutions. Key party sources, including its leading journals, have started to discuss the country’s rapidly aging population as a strategic challenge that requires proactive state intervention. Beijing has adopted modest measures to contain these internal strains without abandoning its core development model. To stabilize the housing market, Beijing has lowered downpayment requirements, increased financing to complete stalled developments, and promoted urban renewal and affordable housing. In the financial sector, regulators have tightened oversight of smaller banks exposed to property and local government debt risk and encouraged them to consolidate and recapitalize to prevent localized stress from becoming a systemic crisis. And on demographic issues, Beijing has offered modest pronatalist incentives such as higher childcare subsidies, expanded parental leave, and a gradual increase of the retirement age.