The global economy is increasingly defined by neo-mercantilist strategies, where nations prioritize security and power alongside prosperity. This shift poses challenges to international economic stability and the dynamics among major powers, with China emerging as a key player uniquely suited to this environment.

China’s economy, nearly equal in size to that of the United States, exhibits significant strengths that bolster its mercantilist stance. It leads or is near the frontier in critical technologies such as artificial intelligence and boasts a manufacturing sector almost as large as the combined output of the US and the euro zone. The country’s gross national savings rate, recorded at 43 percent of GDP in 2025, far surpasses the US rate of 17 percent, reflecting the scale of internal capital available for investment. Additionally, China maintains substantial monopolies in vital global supply chains, including solar photovoltaics, lithium-ion batteries, rare earth minerals, gallium, germanium, and shipbuilding, which provide it with leverage in trade disputes and geopolitical matters.

China’s energy landscape is marked by contrasts with the US. While the US is largely self-sufficient in oil and gas, China relies heavily on coal and renewable energy for electricity generation but faces vulnerabilities in oil and gas supplies, a weakness underscored by conflicts such as the war involving Iran. Nonetheless, China’s high level of self-reliance diminishes its susceptibility to external economic pressure and makes it a critical market for many countries worldwide.

Despite these advantages, China’s economic model presents notable imbalances. Its trade surplus in manufacturing reached approximately 2 percent of global GDP, double that of Japan’s historical peak, contributing to persistent global trade imbalances. Furthermore, while China holds about US$4 trillion in net foreign assets, it records a negative net income of around US$125 billion from these investments, diverging sharply from expected returns and suggesting an undervaluation of the renminbi by roughly 30 percent.

China’s sustained trade surpluses compel other countries to run corresponding deficits, pressuring their domestic industries and fueling protectionist measures, particularly in the US and increasingly in the European Union. This dynamic also affects developing nations, some of which economists identify as hindered by China’s growing manufacturing dominance.

Economic growth in China has slowed considerably, dropping from over 10 percent annually two decades ago to around 4.3 percent in mid-2026. The aftermath of China’s property market collapse has constrained investment opportunities, resulting in an accumulation of savings without sufficient domestic outlets. Though commentators have long called for a shift toward greater consumption to rebalance the economy, such structural changes appear unlikely under the current leadership.

The US and EU are also adopting mercantilist policies, though less systematically, as global economic competition intensifies. Some analysts suggest the introduction of a “resilience account” to complement traditional current account assessments, which would evaluate the geopolitical risks associated with sourcing critical goods. Whether such approaches can redefine competitive advantage in this neo-mercantilist era remains uncertain, as nations navigate the tension between economic interdependence and strategic autonomy.