China’s Geopolitical Strategy in 2025: Energy, Industry, and Tech Sovereignty in a Decoupling World
Securing the Power Base: Energy Infrastructure as a Strategic Foundation
China is leveraging an unprecedented build-out of domestic energy infrastructure to underwrite its long-term technological and industrial ambitions. In 2025, the state-owned grid operator announced a record investment of 650 billion yuan (≈$88.7 billion) in the national power grid – a jump from the prior year – to optimize transmission networks and integrate a surge of renewable power reuters.com. This includes massive ultra-high-voltage (UHV) lines that ferry electricity from China’s interior “mega-bases” of wind, solar, and hydropower to coastal industrial centers. By late 2024 China had 38 UHV lines in operation, with new lines under construction to link resource-rich western provinces to eastern demand hubs reuters.com. These strategic grid upgrades address a critical bottleneck: without them, China’s record-breaking renewable energy boom could overwhelm the existing infrastructure reuters.com.
A wind turbine in operation. China’s domestic renewable capacity expansion has outpaced the world, necessitating major grid investments to integrate wind and solar power.reuters.com, iea.org
China’s commitment to energy security is evident in its dominant role in global clean energy expansion. Over 2024–2030, China is projected to install 3,200 GW of new renewable capacity – nearly 60% of the world’s additions – bringing its share of global renewables to half by 2030 iea.org. Domestically, Chinese firms already lead in green tech manufacturing, supplying ~80% of the world’s solar panels and 60% of wind turbines merics.org. Backed by state banks and industrial policy, China invested $818 billion in clean energy in 2024, more than double U.S. levels chinapower.csis.org. This rapid deployment of hydropower, solar, and wind is aimed at reducing reliance on imported fossil fuels and ensuring a stable power supply for China’s economy chinapower.csis.org. Crucially, Beijing views abundant, secure energy as the bedrock of tech sovereignty – from powering energy-hungry semiconductor fabs to the data centers that train AI models. An illustrative initiative is the “East Data, West Compute” plan, which is constructing huge data-center hubs in China’s less-developed, renewables-rich interior to handle intensive computing tasks chinapower.csis.org. By situating AI supercomputing clusters near cheap hydro and wind power, China can fuel its digital economy while easing strain on eastern cities chinapower.csis.org. In short, China’s push for energy self-reliance – through renewables, grid modernization, and even continued coal use as a backup chinapower.csis.org,chinapower.csis.org – is a strategic attempt to insulate its growth from external energy shocks and provide the electricity needed to drive advanced industries.
Industrial Resilience and Tech Sovereignty: From Semiconductors to AI
Beijing has coupled its energy push with muscular industrial policy to bolster domestic resilience in critical technologies. A decade after Made in China 2025, self-reliance across supply chains has become the overarching objective of Chinese industrial strategy merics.org. Initially aimed at upgrading manufacturing to avoid the middle-income trap, China’s ambitions broadened after the U.S. tech sanctions of 2018. Today, China’s industrial policy explicitly prioritizes bringing key supply chains onshore in the name of economic security merics.org,merics.org. This drive is evident in sectors from electric vehicles to renewable energy: by 2024, domestic firms commanded 90% of China’s EV market (though still reliant on imported high-end chips) and Chinese companies held global market shares of ~50% in rail equipment and 80% in solar panels merics.org. Even in areas where China lags – like advanced semiconductors – the state has ramped up support, betting that massive investment and competition will yield breakthroughs despite inefficiencies merics.org. Xi Jinping’s 2023 call to foster “New Productive Forces” encapsulates this approach: integrating data, digitalization and decarbonization into traditional industries, and preventing even low-end manufacturing from relocating abroad merics.org. Beijing is willing to tolerate short-term overcapacity and price wars (as seen in EVs and solar) as the cost of building a comprehensive industrial base under Chinese control merics.org.
Semiconductors are the clearest test of China’s quest for tech sovereignty. After U.S. export controls cut off access to cutting-edge chips and tooling, China responded with a “whole-of-nation” effort to cultivate an indigenous semiconductor ecosystem. State-backed funds (“Big Fund” phases I–III totaling nearly $80 billion) and local governments have funneled capital into domestic chip foundries and suppliers merics.org. This has yielded some progress: Semiconductor Manufacturing International Corp (SMIC) can now produce 7 nm chips, and memory maker YMTC has grown, partly filling the void of U.S. suppliers merics.org. Tech giant Huawei has taken a central role, orchestrating a “semiconductor national team” – its venture arm co-invests in chip startups and it has reportedly secured priority access to as much as 70% of SMIC’s output for its designs merics.org, merics.org. In 2023, Huawei shocked observers by releasing a 7 nm smartphone chip made in China, seen as a statement of self-reliance. Yet serious bottlenecks remain. China still cannot produce the most advanced lithography equipment (like ASML’s EUV machines) needed for sub-5 nm chips merics.org. Its chip designers rely on foreign IP (ARM architectures) and Western EDA software merics.org. Manufacturing capacity is limited, forcing all Chinese chip firms to compete for allocation at SMIC merics.org. As a result, China remains behind the cutting edge – Huawei’s newest AI accelerators are roughly on par with Nvidia’s 2019-generation chips and suffer from reliability issues merics.org, merics.org. Even within China, Nvidia’s AI GPUs dominate: over 1 million Nvidia H100/H20 units were sold into China in 2024, versus only 200,000 of Huawei’s AI chips merics.org. And Washington’s escalating restrictions – for example, an April 2025 U.S. ban on Nvidia’s H20 chips to China – further squeeze Beijing’s access to high-end hardware merics.org.
To close these gaps, China is doubling down on self-sufficient innovation in AI. President Xi convened a Politburo study session on AI in April 2025, urging the creation of an “autonomously controllable” AI technology ecosystem – from chips to software – free from Western choke points rand.org, rand.org. In practice, this means pouring resources into domestic alternatives: Chinese firms are developing GPU competitors (e.g. Huawei’s Ascend series) and new open-source software frameworks to replace U.S. platforms like Nvidia’s CUDA and Google’s TensorFlow rand.org, rand.org. Beijing launched a national AI investment fund (over $8 billion) and is promoting homegrown AI cloud platforms and talent programs. However, progress is incremental. As of 2025, Chinese AI developers still find local chips and software inferior – training a large AI model on Huawei Ascend processors can be markedly slower and more complex than using Nvidia, causing months of delay in some projects rand.org. Top-tier Chinese AI labs have resorted to creative workarounds to sidestep U.S. sanctions: stockpiling banned chips, clandestine imports, or even locating data centers in third countries (like Malaysia or Mexico) to gain access to unrestricted Nvidia hardware rand.org. These tactics reflect China’s determination to not let decoupling derail its AI ambitions, even as they underscore the enduring grip of U.S. technology. Despite short-term setbacks, state support for AI is unlikely to abate, since Beijing views mastery of AI as central to economic and geopolitical leadership. Notably, one often-overlooked constraint on AI expansion – energy – is being preemptively addressed. China’s planners project a tripling of data center energy demand by 2030, and are confident the country’s aggressive power capacity build-out (from new renewables to advanced nuclear) will meet this challenge rand.org. In effect, China is aligning its energy strategy with its digital strategy: ensuring that its cloud servers and supercomputers won’t go dark for lack of electricity.
Adapting the Belt and Road Initiative (BRI) to a new era is another facet of China’s industrial resilience strategy. After a decade of overseas infrastructure lending, Chinese policymakers have adjusted the BRI model to make it more sustainable and aligned with China’s domestic needs. Gone are the days of indiscriminate megaproject financing; Chinese banks have sharply pulled back on large, risky loans that defined BRI in the 2010s chinaglobalsouth.com. In their place, Beijing is pursuing “high-quality” BRI cooperation – a buzzword for greener, more targeted projects that deliver mutual benefits. For example, the first half of 2025 saw BRI engagement hit a record $123 billion in contracts and investment, increasingly skewed toward energy and technology deals chinaglobalsouth.com, chinaglobalsouth.com. Notably, renewable energy investments under BRI hit all-time highs ($9.7 billion in H1 2025), as Chinese solar and wind manufacturers seek overseas markets amid fierce competition at home chinaglobalsouth.com. This suggests Beijing is using BRI to export excess industrial capacity in clean tech – supplying turbines, panels, and grids to developing countries – which both aids global South partners and shores up Chinese industry chinaglobalsouth.com. At the same time, China hasn’t entirely forsaken fossil fuel projects when strategically convenient: oil and gas deals comprised $30 billion of BRI energy engagements in early 2025, far exceeding renewables, and even some coal projects persist despite Xi’s 2021 pledge to stop overseas coal financing chinaglobalsouth.com. The rebalancing of BRI is also geographical. Chinese investors are gravitating toward regions seen as lower-risk or higher priority – Central Asia, the Middle East, and Africa accounted for about two-thirds of BRI engagement in 2025 – while regions like Latin America saw Chinese infrastructure activity plunge to minimal levels chinaglobalsouth.com, chinaglobalsouth.com. This reflects a convergence of strategic and economic factors: closer neighbors and energy suppliers get more attention, and projects in countries with political or financial uncertainties are trimmed. In summary, China’s industrial policy now extends beyond its borders via a recalibrated BRI: supporting its domestic tech and industrial champions by building supply chains and infrastructure across the Global South, but doing so more selectively to ensure resilience and return on investment.
Navigating Decoupling and Realigning Global Partnerships
Facing U.S.-led “decoupling” efforts and a more fragmented world economy, China has shifted its global posture to protect its interests and exploit new opportunities. Managing strategic rivalry with Washington is priority one. Since 2018, the U.S. has imposed tariffs, cutting-edge tech export bans, and investment curbs to constrain China’s rise. Rather than capitulate, Beijing has treated these actions as impetus to accelerate its self-reliance (as discussed above) and to deepen ties with non-Western partners. Chinese leaders openly frame the contest as part of a broader struggle over the international order. In a September 2025 summit, Xi Jinping unveiled a vision for a “new global security and economic order” prioritizing the Global South reuters.com. Standing shoulder-to-shoulder with Russia’s Vladimir Putin and India’s Narendra Modi, Xi denounced “hegemonism and power politics” – a clear rebuke of U.S. dominance – and called for “true multilateralism” reuters.com. This rhetoric is matched by concrete institution-building. China has reinvigorated groupings like the Shanghai Cooperation Organisation (SCO) – hosting 20 leaders in 2025 – and floated initiatives for SCO members ranging from development aid to an AI cooperation center reuters.com, reuters.com. Most striking is Xi’s proposal for a new SCO development bank, intended as a step toward an alternative financial architecture that circumvents the U.S. dollar and Western sanctions reuters.com. Likewise, Beijing has championed the expanded BRICS bloc and the New Development Bank as platforms to amplify Global South voices and reduce reliance on Western-led systems. These moves signal China’s intent to position itself as the hub of a more multipolar global economy – one where trade, technology, and finance can increasingly flow outside American or EU control.
A cornerstone of China’s outreach is forging tighter links with other emerging powers and resource partners to blunt the impact of Western de-linking. Nowhere is this more evident than in the Sino-Russian entente. Since Moscow’s estrangement from the West in 2022, China has boosted imports of Russian energy and integrated Russia deeper into its economic orbit chinapower.csis.org. Russian oil comprised nearly 20% of China’s imports in 2024 (up from 16% in 2021), and Russian pipeline gas now accounts for 38% of China’s imported gas – a near tripling in three years chinapower.csis.org. This energy partnership serves mutual interests: it props up Russia’s sanctions-hit economy while giving China a secure overland energy supply less vulnerable to U.S. naval power. As one analysis noted, Russia’s proximity “reduces the likelihood that physical energy deliveries will be cut off, which enhances China’s overall energy security.” chinapower.csis.org Beijing is carefully expanding these linkages (negotiating new Siberian gas pipelines, co-developing Arctic LNG projects chinapower.csis.org) even as it diversifies oil imports from Gulf states. The message is that U.S. attempts at isolation are pushing China to build an alternate nexus of trade and energy spanning from Moscow to Riyadh to Luanda.
Meanwhile, China is recalibrating its engagement with U.S. allies and partners, especially in Europe. The European Union has adopted a policy of “de-risking” from China – seeking to reduce critical dependencies without a full rupture. This has introduced friction in specific sectors. A flashpoint in 2024 was Europe’s move to counter China’s inroads in electric vehicles: after Chinese-made EVs surged from near 0 to 8% of the EU market (on track for 15% by 2025), the European Commission launched an anti-subsidy probe and approved steep tariffs on Chinese EV imports (ranging up to 45%) reuters.com, reuters.com. Brussels cited China’s state support – cheap loans, grants, and an oversupply of EVs – as justification for the tariffs, despite divisions among EU member states on confronting Beijing reuters.com, reuters.com. Beijing’s response was swift and pointed: it blasted the EU’s measures as “protectionist” and retaliated with its own investigations into European goods (like luxury wine, dairy, and autos) reuters.com, reuters.com. This tit-for-tat exemplifies the growing regulatory friction between China and Europe. On one hand, the EU now explicitly labels China a “strategic competitor and systemic rival” in key domains reuters.com and is screening Chinese investments (5G telecom, critical minerals) on security grounds. On the other, China is leveraging diplomacy and its market size to prevent a wholesale Europe-U.S. alignment against it. Throughout 2025, Chinese officials sought to assuage European concerns – highlighting cooperation on climate change and trade, and inviting European leaders to Beijing. Xi Jinping has struck a conciliatory tone in high-level exchanges, calling for “proper handling of frictions” even as he urges Europe to maintain “strategic autonomy” rather than follow U.S. decoupling youtube.com. The result is an ongoing recalibration: Europe is cautiously tightening the reins on Chinese access in sensitive areas, but not decoupling entirely, while China tries to segment Europe’s approach from America’s harder line.
Finally, China’s deepening ties across the Global South reveal its ambition to lead an alternative globalization. Beijing has cast itself as the champion of developing nations’ growth – a stance reinforced by initiatives like the Global Development Initiative and high-profile summits. At the 2023 Belt and Road Forum and subsequent gatherings, Xi announced packages of support (from debt relief to technology transfers) and emphasized “people-centered” and sustainable projects, seeking to reboot the BRI’s image. By 2025, some 150 countries are part of BRI, and China’s cumulative financing in the Global South rivals that of Bretton Woods institutions in scale chinaglobalsouth.com. In Africa, Southeast Asia, and the Middle East, Chinese-funded railways, ports, and power grids are visibly expanding connectivity. Many of these regions responded warmly to Xi’s message of a more inclusive order: China’s portrayal of itself as a reliable industrial and capital partner resonates amid waning Western investment. The ongoing shift was vividly on display at the 2025 SCO summit in Tianjin, where leaders from Central Asia, South Asia, and beyond stood literally hand-in-hand with Xi and Putin reuters.com. In that forum, China offered billions in loans and pledged to conduct more trade in local currencies – moves aimed at weaving a web of interdependence that bypasses traditional dollar-based finance reuters.com, reuters.com. From Southeast Asia to Latin America, China is also advancing a “Digital Silk Road” – exporting telecom networks, satellites, and fintech systems – which not only opens new markets for Chinese tech firms but also potentially extends China’s technical standards and influence merics.org,merics.org. In sum, through a mix of infrastructure diplomacy, trade, and norm-setting, Beijing is striving to lock in its role as the central node of South-South economic flows.
Strategic Implications: A Post-Neoliberal Order in the Making?
China’s 2025 strategy illuminates the contours of a nascent post-neoliberal economic order. In this emerging paradigm, state-guided development and geo-economic blocs are supplanting the unfettered globalization of previous decades. Beijing’s actions suggest that China seeks to position itself as a stable hub of production, energy, and capital in a bifurcating world. By securing domestic energy and food supplies, tightly controlling industrial supply chains, and innovating around foreign tech barriers, China is fortifying an internal ecosystem that is less vulnerable to external pressure. At the same time, by extending infrastructure loans, digital tech, and renminbi liquidity abroad, it is constructing an external network of partners tied into China-led channels of commerce and finance. This two-pronged strategy – “internal resilience and external outreach” – is fundamentally different from the neoliberal playbook of open markets and minimal state intervention. It reflects lessons learned from recent shocks: the pandemic, supply chain disruptions, and Western sanctions have convinced Beijing that self-reliance and diversification trump overdependence on global markets merics.org chinapower.csis.org. Notably, this worldview is increasingly shared by other major economies, which are also adopting industrial policies and “friend-shoring” strategies. In that sense, China’s approach is as much a product of the post-globalization zeitgeist as it is a driver of it.
Whether China can truly become a “safe harbor” for global growth amid U.S. decoupling will depend on several factors. Domestically, it faces headwinds – high local debt, an aging workforce, and the technical hurdles in achieving cutting-edge chip independence. Internationally, its assertive moves have provoked wariness, not just in Washington but in capitals from New Delhi to Brussels. Yet, Beijing is betting that its comprehensive toolkit – vast manufacturing capacity, financial firepower, and now an emphasis on sustainability – will make it indispensable. If Western firms and investors see China’s supply chains and energy grid remain robust (even as the West grapples with recession or conflict), China could attract capital as a relative haven. Indeed, Xi’s calls for “inclusive globalization” and promises of development financing are calibrated to reassure countries that China can provide public goods the traditional Western-led order is failing to deliver reuters.com, reuters.com. In the international arena, this may translate to more countries hedging their bets, engaging with China’s initiatives even as they maintain security ties with the U.S. We are likely witnessing the gradual formation of parallel systems: one dominated by the U.S. and its allies, and another where China is the central pillar.
China’s strategy in 2025 thus reveals a great deal about the world’s trajectory. It marks the assertion of a geo-economic alternative – one where state capitalism, energy security, and strategic alliances shape the rules of globalization, rather than laissez-faire markets. The Chinese leadership appears convinced that by building a resilient home base and a web of Global South partnerships, China can weather the storm of decoupling and even turn it to advantage, becoming the indispensable nation for production, innovation, and growth in much of the world. For proponents of a liberal, U.S.-led order, this poses a formidable challenge. For many developing nations, it offers a different development path. And for China itself, it is a high-stakes attempt to rewrite the rules of engagement in the world economy – one that will determine its place in the global power structure for decades to come.
Sources: China State Grid Corp. announcements and Reuters reporting on energy investmentsreuters.comreuters.com; International Energy Agency forecasts iea.org; Mercator Institute for China Studies (MERICS) analysis of Made in China 2025 outcomes merics.org merics.org; CSIS ChinaPower on energy security and Russia ties chinapower.csis.org chinapower.csis.org; Reuters coverage of Xi’s 2025 SCO summit remarks reuters.com reuters.com; Reuters coverage of EU–China trade friction over EVs reuters.com reuters.com; Belt and Road investment data from Green Finance & Development Center via China-Global South Project chinaglobalsouth.com chinaglobalsouth.com; RAND Corporation and MERICS reports on China’s semiconductor and AI initiatives merics.org rand.org; among other cited analyses.