China wants to be a responsible power, just not a ‘developed’ one
As the country edges towards high-income status, it is trying to balance upgrading its economy while holding on to its developing-nation identity
ON THE surface, Beijing’s recent announcement that it will forgo benefits given to developing countries in future World Trade Organisation (WTO) deals – while maintaining its identity as one – appears contradictory.
But since the WTO does not have a formal process to determine which country is “developed” or “developing” and leaves it to members to self-designate, China’s status as a developing nation – which it declared when it joined the WTO in 2001 – is still valid.
Its decision to retain the label but give up the levers of preferential treatment is a calibrated move to project itself as a responsible major power, while preserving its role as champion of the Global South.
WTO’s Special and Differential Treatment (SDT) provisions are meant to help developing economies integrate into global trade through longer transition periods, flexible obligations and technical assistance.
While China benefited from these arrangements after joining the WTO, its ascent to become the world’s second-largest economy has made its continued use of such privileges increasingly controversial.
The US and other advanced economies have accused Beijing of exploiting its status to secure unfair advantages, prompting political efforts, such as a 2023 US congressional vote to strip China of the label.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
By voluntarily renouncing new SDT benefits, Beijing is signalling that it is willing to shoulder greater global responsibilities and counter Western narratives that it has been getting a free ride of late.
In practice, the economic cost to Beijing from relinquishing its right to claim new carve-outs is modest. Much of the SDT relief China once enjoyed has already expired, as the transition periods for many WTO commitments have long lapsed, say experts.
The remaining SDT benefits in current negotiations for an economy with a scale like China’s are also limited compared with those available to smaller developing nations.
SEE ALSO
The move leaves untouched the existing SDT rights China secured on joining the WTO in 2001.
And state support such as subsidies, tax incentives and industrial policy tools – cornerstones of China’s growth model – will continue.
China will, however, face more stringent requirements for its industries in future WTO negotiations.
Still, the political and diplomatic impacts far outweigh the economic cost and serve deeper strategic objectives as Beijing promotes itself as a constructive force in reforming the WTO and restoring its credibility amid paralysis in trade governance.
Domestically, the decision dovetails with China’s pursuit of high-quality development, which is the basis of its new economic model.
Accepting tighter rules and higher standards could push Chinese companies to be more competitive and innovative, which are essential conditions to escape the middle-income trap and transition into a truly advanced economy.
Meanwhile, China will continue to frame itself as a developing nation in solidarity with the Global South, maintaining influence through aid, infrastructure investment and cooperation.
In doing so, China seeks to balance two ambitions: to be seen as a responsible, rule-abiding major power in the global trading system, and to remain the self-styled leader of developing nations.
Why now?
China is already not that far from becoming a developed country by certain metrics.
Some economists predict it may cross the line in 2026. The World Bank’s high-income threshold is a gross national income per capita of more than US$13,935 (S$18,052); China touched US$13,660 in 2024.
Even so, Chinese leaders, including President Xi Jinping, have frequently asserted that China “has been and will always remain a member of the developing countries”.
Beijing argues that large internal inequalities, especially between rural and urban areas, and uneven regional development justify its continued developmental status.
When it does eventually attain rich-nation status, it may continue to hang on to its developing-country label for a while longer, while selectively giving up certain benefits that come with that status.
President Xi has set a target for the country’s per capita gross domestic product to match that of a “moderately developed country” by 2035.
But there is deep anxiety that it may be edging into the middle-income trap, a risk faced by many economies that grow rapidly on capital accumulation and cheap labour but fail to transition to a higher value growth model.
For China, decades of investment, cheap credit and export orientation have lifted it into the upper-middle income category, but the frontier of high income demands innovation, strong institutions and sustained productivity growth.
Chinese leaders are worried that the country will be stuck in middle-income limbo, and that as China’s early growth drivers lose steam, its new ones – high-tech industries, domestic consumption, industrial upgrading – cannot take hold fast enough.
Its upcoming 15th Five-Year Plan will be closely watched for how it will endeavour to make that leap into the high-income bracket.
From Oct 20 to 23, China’s leadership will meet for the Fourth Plenum to review the 2026 to 2030 plan – the country’s road map for economic and social development that guides policy for the next five years.
The plan typically charts targets for growth, industrial development, the environment and social progress, among others.
Some details will be released after the conclave wraps, while the plan has to be approved by Parliament in March 2026.
As China persists in fostering “new quality productive forces” – tech-intensive, productivity-driven, less resource-heavy industries – the five-year blueprint will most likely outline China’s priority to become an innovation and technology leader. This will include boosting R&D, especially in semiconductors, biotechnology, artificial intelligence (AI), quantum, and clean energy.
Other priorities include upgrading traditional industries, rebalancing domestic demand and strengthening economic resilience by diversifying trade ties and cutting reliance on key foreign imports.
Beijing appears focused on expanding the economic pie rather than redistributing it for now, even though it faces pressure to boost domestic consumption that is crucial to sustaining its long-term growth, said senior analyst Alexander Brown at the Mercator Institute for China Studies at a recent briefing on the upcoming Five-Year Plan.
Policymakers see a strategic opportunity now to take the lead in many tech domains, and they will double down.
“Once they’re in a leading position, not just in green tech and EVs (electric vehicles), but in other areas like semiconductors, robotics, machinery, then they’ll be in a better position to capitalise on that and spread that wealth more broadly,” said Brown.
In an April speech to launch his book, Demystifying The Chinese Economy, renowned economist Justin Lin Yifu dismissed the “Peak China” theory – the notion that the country’s growth has peaked. He argued that there is ample scope for sustained expansion thanks to the Fourth Industrial Revolution.
This new era is driven by AI, big data, and short innovation cycles, favouring nations rich in human rather than financial capital.
With more science, technology, engineering and mathematics graduates than the Group of Seven combined, a massive domestic market, and a comprehensive industrial ecosystem, China is uniquely placed to scale new technologies, said Professor Lin, former chief economist of the World Bank.
If Beijing manages to overcome tech chokepoints caused by US restrictions, it could sustain 5 per cent to 6 per cent growth through 2035 and continue converging with advanced economies after that, he added.
But analysts have also warned that Beijing’s own chokepoint threat – export controls on rare earth elements or threats to restrict them – will push other countries to build capacity, and, in turn, hurt China’s own industry.
China’s dual identity as both an aspiring superpower and a self-proclaimed developing nation has served its strategic interests, but that balance will be harder to sustain as it nears rich-country status.
If Beijing succeeds in transforming its growth model while maintaining solidarity with the Global South, it may yet redefine what it means to be a developed nation in the 21st century. THE STRAITS TIMES
Copyright SPH Media. All rights reserved.
