Bank

Donald Trump

rocky

China’s President Xi Jinping is now in the hot seat. Donald Trump is serious about slapping 60% tariffs on Chinese goods. For&nbsp; an economy struggling with weak consumer spending, a rocky property market, and shaky export numbers, this is terrible timing.
Xi’s 5% growth target for this year already looked like a stretch, and now Trump’s new tariffs are threatening to make it completely out of reach. Investors are watching as China’s economy wobbles, and everyone wants to know: is Xi about to buckle under Trump’s pressure?
<h3 id="span-style-font-weight-400-deflation-fears-economic-doubts-and-the-property-market-disaster-span">Deflation fears, economic doubts, and the property market disaster</h3>
Xi’s government has been trying to stabilize things with stimulus measures, but the results have been underwhelming. Consumer spending has stayed low, and the country’s giant real estate market—once a pillar of growth—remains in turmoil.
In fact, the property sector has seen its worst downturn since 2014, dragging down home prices and shaking up consumer confidence.&nbsp;
Bloomberg economists <a href="https://www.bloomberg.com/news/articles/2024-11-08/china-economy-can-xi-s-stimulus-measures-counter-trump-tariffs-deflation?srnd=phx-economics-v2&amp;embedded-checkout=true" rel="noopener noreferrer nofollow" target="_blank">don’t</a> see much hope for Xi’s growth target. By September, Bloomberg’s survey showed fewer than 20% of economists expecting China to hit the 5% goal. Top banks like Bank of America are openly questioning why Beijing’s policies aren’t doing more to revive domestic demand.
China’s heavy reliance on exports as a growth engine isn’t the answer here either. Countries worldwide are wary of the impact of China’s cheap goods, especially when those products come at the expense of local industries.
Vice Finance Minister Liao Min has defended China’s manufacturing, saying it helps keep global prices down, but that isn’t calming international critics.
Some analysts worry that <a href="https://www.cryptopolitan.com/china-economic-defenses-trumps-tariffs/" rel="noopener noreferrer nofollow">China</a> could be heading into a “Japan-style” stagnation. The signs are there: faltering domestic demand, slipping prices, and limited policy tools to turn things around.
<h3 id="span-style-font-weight-400-trump-s-threats-and-xi-s-call-for-mutual-respect-span">Trump’s threats and Xi’s call for “mutual respect”</h3>
So, how is Xi handling Trump’s aggressive comeback? The man isn’t exactly pushing back, which is quite uncharacteristic of him. In fact, he’s calling for both countries to “get along.” Through state media <a href="https://www.youtube.com/watch?v=s0Arxyyiop4" rel="noopener noreferrer nofollow" target="_blank">CCTV</a>, Xi recently reached out to Trump with a message urging cooperation over confrontation, saying it’s in both countries’ interests.
But the US president is ready to escalate. While both he and his former opponent, Kamala Harris, vowed to crack down on China, Trump is taking it to the next level. Trump wants to hit Chinese imports with steep tariffs to “restore balance” in US-China trade.
“Trump’s maximum-pressure approach is real,” <a href="https://fortune.com/asia/2024/11/07/xi-jinping-tells-trump-us-china-must-get-along/" rel="noopener noreferrer nofollow" target="_blank">says</a> Yun Sun, a Senior Fellow at the Stimson Center. “He won’t hesitate to impose these tariffs.” And as Trump gears up for what could be a new trade war, Beijing is warning of consequences. Chinese officials have stated that a trade war would have “no winners,” but they’re preparing for the fallout.
As if the <a href="https://www.cryptopolitan.com/imf-us-china-tariff-crash-global-economy/" rel="noopener noreferrer nofollow">tariff</a> threat isn’t enough, Trump claims he could stop China from attacking Taiwan with a massive 150% tariff threat, saying he can “talk Xi out of it.” This is a bold statement, considering China’s long-standing view of Taiwan as a “renegade province” that needs to be brought back under its control.&nbsp;
With U.S. policy still somewhat ambiguous on whether it would defend Taiwan militarily, Trump’s tough stance could bring more uncertainty to the already tense region.
<h3 id="span-style-font-weight-400-china-s-economic-woes-span">China’s economic woes</h3>
China’s economy, which once seemed unstoppable, is now showing cracks, and it’s more than just weak consumer spending. Growth has slowed dramatically, from around 7% in Trump’s first term to 4.5% now.
Adding to the economic troubles is China’s heavy investment in its military. Over the past decade, Beijing has shifted its focus from consumer-driven growth to building its military might. As Professor Chen Zhiwu of the University of Hong Kong <a href="https://www.cbsnews.com/news/trump-china-tariff-could-actually-help-beijing-economy-amid-taiwan-standoff/" rel="noopener noreferrer nofollow" target="_blank">puts it</a>, “China has put resources into the military while consumer industries stagnate.”
And China’s military investments are no joke. The country now has the largest fleet of warships globally, even surpassing the U.S. According to Chen, while defense and aerospace industries have seen double-digit growth, consumer sectors are struggling or shrinking.
Some, like Wang Xiangwei, former editor-in-chief of the South China Morning Post, see Trump’s pressure as potentially good for China in the long run. By pushing back, <a href="https://www.cryptopolitan.com/dollar-could-rally-following-trumps-policies/" rel="noopener noreferrer nofollow">Trump</a> could force China to refocus on economic sustainability, something Beijing has neglected.
China’s growth relied on cheap manufacturing and huge infrastructure spending for decades, but that model is cracking. Labor is now more expensive, and the government has run out of major projects to build. Xi is caught between reviving a stalled economy and maintaining a strong defense posture.

Is China’s president Xi Jinping bowing down to Donald Trump?

Table of Contents

Cryptopolitan_News

Other articles published on Nov 13, 2024

Join our free newsletter for daily crypto updates!