Japan Institute for National Fundamentals
https://jinf.jp/

Speaking out

Hideo Tamura

【#1233】Beware of China’s Seizure of Dual-use Technologies

Hideo Tamura ／ 2025.03.12 (Wed)


March 10, 2025

　
Chinese government under Presidents Xi Jinping has made clear its policy of military buildup amid economic stagnation at the National People’s Congress (NPC), the Communist Party-led parliament, which will end in Beijing on March 11. The government will hasten to strengthen dual-use technologies such as advanced semiconductors and artificial intelligence and do its utmost to seize cutting-edge technologies from the West.

Real economic growth is around 2%

At the beginning of the NPC, Premier Li Qiang announced that a year-on-year growth target for real gross domestic product in 2025 is around 5%, the same as in the previous year. A defense budget is 1.7846 trillion yuan (about $250b), nominally up 7.2% from the previous year.

In China where deflationary pressure is strong, the real economic growth rate is higher than the nominal growth rate. According to official Chinese statistics, the real growth rate was 5.4% in 2023 and 5% in 2024, against the respective nominal growth rates of 4.8% and 4.2%. However, Gao Shanwen, a prominent Chinese economist who has advised the Chinese government, revealed at a symposium of a U.S. think tank in December that China’s real growth rate was actually about 2% on average, rather than about 5% as boasted by the regime. Xi was reportedly so enraged that he ordered the public security authorities to discipline Gao.

Fixed asset investment, which has accounted for around 50% of China’s GDP, has declined significantly due to the bursting of the housing bubble. Based on fixed asset investment and other data released monthly by the National Bureau of Statistics of China, I have calculated the actual nominal growth rate at around 0% in 2023 and just under 4% in 2024, with the real growth rate at just under 1% and around 3%, averaging around 2%. What Gao said was correct. The collapse of the real estate bubble has yet to bottom out.

Military expansion advancing utilization of AI

China’s national fortunes depend on the expansion of military spending amid the lack of a way out of the economic slump. Military expansion is not limited to a predetermined policy, such as the reinforcement of aircraft carriers. China is now focusing on the use of AI in the military field. Generative AI can instantly analyze vast amounts of information and data and make accurate predictions, being used growingly in both the military and civilian sectors. AI will dramatically increase the number of opportunities for drones to be used as weapons on land, at sea, and in the air. At the same time, AI will be embedded in robots and introduced into manufacturing automation and product development, becoming the new core of economic growth.

U.S. President Donald Trump is working with Silicon Valley’s information technology entrepreneurs to bring AI to military and government institutions.

At the NPC, Xi emphasized the importance of making AI a new pillar of China’s economy, with the rise of generative AI startup DeepSeek in mind. However, China has an Achilles’ heel: Many of China’s core AI technologies including semiconductors are inferior to those of the U.S., and subject to U.S. export control. Japanese companies that see China only as a huge market will be targeted and forced to provide China with cutting-edge technologies. Be careful.

Hideo Tamura is a Planning Committee member at the Japan Institute for National Fundamentals and a columnist for the Sankei Shimbun newspaper.