China, the world’s second-biggest economy, is using its enormous economic clout as a trade war with the United States escalates. By the end of 2024, the country had risen to an incredible $1 trillion trade surplus. This new milestone makes it the undisputed world’s largest exporter. China’s remarkable economic performance increases its power in global trade. With a near-monopoly on the production and refining of rare earth elements, the country’s influence becomes more pronounced across sectors vital to modern technology.
In 2023, China became the biggest trading partner to 60 different countries—deepening its connections in both the developing world and developed Europe. China’s dominance in rare earths is nothing short of terrifying. It’s responsible for roughly 61% of the world’s total and carries an astounding 92% of global refining capacity. The country is second only to China in deposits of vital minerals, including dysprosium and yttrium. That treasure trove of data increases its geopolitical importance in supply chains from EVs to AIs.
Third, China’s economic strategy entails major investments in strategic emerging industries and national infrastructure projects. China pours billions into its Belt and Road Initiative to build influence with countries across the Global South. This strategy increases China’s political clout and helps generate economic development for partner countries. This sweeping pledge seeks in part to create a newer, stronger manufacturing base. In doing so, China will be better positioned to compete on the global stage.
In July, the Chinese government announced it would be limiting exports of seven key rare earths. These materials are essential for manufacturing cutting-edge technologies, including AI chips. The potential for a ban on exporting antimony, another critical mineral, has alarmed. The tech industry, including Semiconductor Industry Association, is deeply concerned about emerging vulnerabilities across the supply chain.
“Everything you can switch on or off likely runs on rare earths,” noted Thomas Kruemmer, director of Ginger International Trade and Investment, emphasizing the indispensable role these resources play in modern technology.
China’s exceptional political economy is one factor that accounts for its resilience to external pressures. As an authoritarian regime, it has greater pain tolerance than democracies. This capacity allows China to endure economic challenges such as tariffs without immediate repercussions on its domestic stability. This enormous domestic market serves as a safety net for many Chinese exporters. In short, it shields them from the harmful effects of unwarranted international trade spats.
Moreover, China’s announcement to invest over $1 trillion in AI innovation over the next decade signals its commitment to maintaining technological leadership. It’s a smart investment that dovetails with its broader strategy of investing heavily into high-tech industries recognized as key sectors for long-term economic competitiveness.
One of the most significant impacts has been on agricultural markets, with repercussions felt from the U.S.-China trade war and associated tariffs. China has retaliated against U.S. agricultural products. This step has lessened its dependence on U.S. commodities and bolstered its food security bona fides in the process. Marina Yue Zhang, an associate professor at the University of Technology Sydney’s Australia-China Relations Institute, described a surprisingly simple but very effective trick. She said that “the tactic does two things at once.” It deprives America’s farm belt of a once-captive market and burnishes China’s food security credentials.
China’s strategic maneuvers are not without their challenges. The country’s adaptability and resource richness provide it with various avenues to navigate these complexities. The PRC is determined to further extend its economic clout. Our global partners and competitors are watching every move it makes.
“Reaching a deal at the expense of China’s interests.” – BBC News
As the trade war between China and the United States continues to play out, the nature of international relations will most certainly change. Both countries are under pressure to make their economic policies work. China’s all-of-country strategy, with its large domestic market and robust R&D investment, will make sure that the country remains ahead in the global economic race.