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globzette.com > Blog > Business > China’s Economic Outlook Faces Fresh Challenges Amid Trump’s Return and Trade Tensions
Business

China’s Economic Outlook Faces Fresh Challenges Amid Trump’s Return and Trade Tensions

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Last updated: November 11, 2024 6:31 am
Admin
Published: November 8, 2024
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China’s leaders, preparing for a second Donald Trump presidency, should present new economic policies to offset several internal and external challenges. Trump’s campaign pledges of vital import taxes on Chinese goods, maybe as high as 60%, have sparked worries that his return to the Oval Office will significantly negatively influence China’s economy, which has been trying to recover momentum since the epidemic.

Contents
Why Are "The Stakes Higher Than Ever"?Will China's Economic Recovery Continue to Struggle?Can China Shift from Export-Driven Growth to Domestic Demand?Will High-Tech Exports Help Cushion the Economic Blow?How Is Western Market Resistance Impacting China's High-Tech Export Growth?Will Trump's Return Bring More Uncertainty to China's Economic Path?

While jeopardizing President Xi Jinping’s ambitious aim to make China a global leader in technology, Trump’s victory might exacerbate already strained U.S.-China relations. These Washington policies will hinder Beijing’s attempts to stabilize development at a time when China suffers a property market downturn, high unemployment, mounting government debt, and low consumer spending.

Why Are "The Stakes Higher Than Ever"?

China’s highest legislative body, the Standing Committee of the National People’s Congress (NPC), will likely declare financial policies in the following days. Many analysts claim these pronouncements are vital for stabilizing the national economy.

One analyst observes that Trump’s trade posture toward China is expected to be stricter than in his first term, so the stakes for the latest declaration from China’s leadership are higher than before. “I think we should believe that he means it when [he] talks about tariffs, that he sees China as having reneged on his trade deal, that he thinks China and COVID-19 cost him the 2020 election.”

Trump applied up to 25% tariffs on various Chinese products throughout his first term. That strategy could have been more effective under the Biden administration, which mostly maintained and increased the tariffs. China now finds its economic situation more precarious than it did during Trump’s first tariff hikes.

Will China's Economic Recovery Continue to Struggle?

China has produced dismal economic results despite hopes for a quick turnaround following the relaxation of its rigorous Covid-19 regulations two years ago. The International Monetary Fund (IMF) reduced its projection for China’s growth rate earlier this year to 4.8% for 2024, which falls on the low end of Beijing’s aim of “around 5%.” The IMF projects China’s GDP will slow even more to 4.5% by 2025.

Though cautious, China’s government has been somewhat stunned by this economic downturn. Declaring China would move from “rapid growth to a stage of high-quality development,” President Xi set the foundation for a new financial plan in 2017. This change sees sophisticated manufacturing and green sectors driving a future. Some economists, however, contend that China’s economy presents particular difficulties that need to be amenable to high-tech exports.

Can China Shift from Export-Driven Growth to Domestic Demand?

“China cannot simply export itself out of trouble,” says one well-known economist who thinks the nation runs the risk of experiencing a Japan-like stagnation, in which case it might suffer protracted economic difficulties following a housing and stock market boom.

Some counsel China to “tap untapped consumer demand” and cut its dependence on export-led growth, which would help protect it against trade shocks. They say, “That would not only encourage more sustainable growth but also lower trade tensions and [China’s] vulnerability to external shocks.”

Will High-Tech Exports Help Cushion the Economic Blow?

Long regarded as the worldwide low-cost manufacturing centre, China has made significant progress in high-tech exports. Today, it leads the globe in manufacturing lithium-ion batteries, electric vehicles (EVs), and solar panels. The International Energy Agency (IEA) claims that China is the top producer of EVs and their batteries, accounting for more than 80% of worldwide solar panel manufacture.

With investments in clean energy accounting for a third of the world’s total, the IEA has underlined China’s “remarkable progress” in the renewable energy sector. A top research fellow at the London-based Chatham House notes, “For sure, there is an overall effort to support high-tech manufacturing in China.” “This has been rather successful.”

Rising by 30% in 2023, exports of green technologies—including EVs, lithium-ion batteries, and solar panels—surpassed one trillion yuan ($139 billion) for the first time. This remarkable expansion has helped offset some of the country’s continuous property crisis’s economic burden. Analyzers caution, nevertheless, that depending just on exports could not be enough for long-term stability.

How Is Western Market Resistance Impacting China's High-Tech Export Growth?

Western markets, especially the European Union, have rebelled against China’s fast increase in high-tech exports. Reflecting increasing worries about overreliance on Chinese imports, the EU raised taxes on Chinese-built EVs in October to as high as 45%.

One director of economic research notes that Chinese imports are finding less welcome in the United States and the EU. “The problem right now is that big consumers of those goods, including Europe and the U.S., are progressively reluctant to receive them,” they state.

Will Trump's Return Bring More Uncertainty to China's Economic Path?

Beijing is at a pivotal point in deciding whether its most recent economic policies can protect the country from further disturbances as Trump gets ready to retake power. Trump’s promise to impose additional taxes on Chinese goods gives China’s attempts to adjust to a more hostile global trading environment fresh importance.

China’s overcapacity will undoubtedly get worse. One head economist for the Asia-Pacific area at a well-known investment bank claims they have no other source of expansion.

As China considers these new policies, Beijing must evaluate whether its present policies will help an economy with rising trade tensions, a declining property sector, and pressure to shift toward sustainable development

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