ReutersChina is expected to introduce new measures to boost its flagging economy as it prepares for a second term as President Donald Trump.
Trump won the election on a platform promising high import taxes, including tariffs of up to 60% on goods made in China.
His victory could now thwart Xi Jinping’s plans to transform the country into a tech powerhouse – and further strain relations between the world’s two largest economies.
Since the outbreak, China’s economic growth has slowed due to a sluggish real estate market, rising government debt and unemployment, and sluggish consumption.
The stakes are therefore higher than ever for the latest announcement from the National People’s Congress Standing Committee (NPC), the executive arm of China’s legislature.
Trump imposed tariffs of up to 25% on Chinese goods during his first term.
China analyst Bill Bishop said Trump’s words about new tariff plans should be believed.
“I think we should believe he’s serious [he] When it comes to tariffs, he thinks China violated his trade deals, and he thinks China and COVID-19 cost him the 2020 election.”
After Trump leaves the White House in 2021, the pressure from Washington has not eased. The Biden administration has kept those measures in place and at times expanded them.
While Trump’s first wave of tariffs were painful for China, the country is now in a more vulnerable position.
The economy has struggled to return to pre-pandemic growth levels since it abruptly abandoned strict coronavirus restrictions two years ago.
Instead of achieving the speedy recovery that was widely expected, China has become a regular source of disappointing economic news.
Even before Trump was elected and after China began rolling out measures to support the economy in September, the International Monetary Fund Lower annual growth target For the country.
The International Monetary Fund currently predicts that China’s economy will grow by 4.8% in 2024, which is at the lower end of Beijing’s “about 5%” target. China’s annual growth rate is expected to drop further to 4.5% next year.
But the end of decades of hyper-growth has not caught the country’s leaders completely off guard.
In a speech in 2017, President Xi Jinping stated that China planned to move from “a stage of rapid growth to a stage of high-quality development.”
Since then, Chinese officials have repeatedly used the term to describe an economic transition driven by advanced manufacturing and green industries.
But some economists say China cannot simply export its way out of trouble.
Stephen Roach, former chairman of Morgan Stanley Asia, said China risks falling into the decades-long economic stagnation Japan experienced after the stock and real estate bubble burst in the 1990s.
To avoid that fate, China should tap into “untapped consumer demand” and move away from “export- and investment-led growth,” he said.
This would not only encourage more sustainable growth but also reduce “trade tensions and [China’s] Vulnerable to external shocks,” he said.
This stronger economic model could help China fend off the threat posed by Trump’s return to power.
New economy, old problems
But China, long the world’s factory for low-cost goods, is trying to replicate that success with high-tech exports.
It is already a world leader in solar panels, electric vehicles (EVs) and lithium-ion batteries.
According to the International Energy Agency (IEA), China currently accounts for at least 80% of solar panel production. It is also the largest maker of electric vehicles and the batteries that power them.
The International Energy Agency said last year that China accounts for one-third of the world’s investment in clean energy and that China “continues to make significant progress in increasing renewable energy capacity.”
“What is certain is that China is fully supporting high-tech manufacturing,” said David Lubin, a senior fellow at London think tank Chatham House.
“It was very successful,” he added.
Exports of electric vehicles, lithium-ion batteries and solar panels jumped 30% in 2023 to exceed 1 trillion yuan ($139 billion; £108 billion) for the first time, as China continues to strengthen its global dominance across industries.
Export growth could help cushion the blow to China’s economy from the current real estate crisis.
“China’s overcapacity is going to increase, there’s no doubt about it. They have no other sources of growth,” said Alicia Garcia-Herrero, chief Asia-Pacific economist at investment bank Natixis.
But as exports increase, so does resistance from Western countries, not just the United States.
Just last month, the EU increased tariffs on Chinese-made electric vehicles to as high as 45%.
“The problem now is that the big recipients of these commodities, including Europe and the United States, are increasingly reluctant to take them,” said Katrina El, research director at Moody’s Analytics.
Today, as Trump returns to the Oval Office and promises to crack down on Chinese imports, Beijing will have to ask itself whether its latest measures to shore up a slowing economy are enough.
