In a recent interview on CNBC’s “The China Connection,” David Li, an economics professor at China’s Tsinghua University, articulated that vision. He further pointed out that raising domestic consumption is number one on Beijing’s list of priorities. This fall, China finds itself at the center of a challenging global situation characterized by increasing tariffs and changing trade alliances. His successor, President Xi Jinping, is currently in the middle of a third, unprecedented term. He is adamant that China should use its new global power and influence, despite the collateral damage to its short-term economic growth.
Beijing’s current economic strategy — so much more than just a Belt and Road initiative — is rooted in this longing to grow internally while navigating and deflecting external pressures. As noted by Li, the pivot towards domestic consumption is crucial for maintaining economic buoyancy. This new effort is part of a much larger pivot in policy as China seeks to lessen its dependence on overseas markets.
As it stands now, the U.S. has established an effective 145% tariff rate on Chinese goods as a result of last week’s escalation. In retaliation, China raised the ante by imposing a jaw-dropping 125% increase on U.S. products. It derisively referred to the tariff predicament as a “numbers game” and intends to ignore the issue. These recent advancements highlight the continued trade strife between the two countries, as well as the intricacies of the U.S.-China economic relationship.
There is a strong concern that Vietnam is the next target of U.S. tariffs. Consequently, it is experiencing some of the worst rates in the state. To calm ruffled feathers, Vietnamese Prime Minister Pham Minh Chinh has offered to purchase more U.S. defense products. He is asking for a 45-day postponement on the tariffs so that negotiations can continue. This maneuver indicates Vietnam’s larger, more crafty strategy to maintain a balance in its trade relations while tensions continue to rise between both the U.S. and China.
China’s economic indicators tell a completely contradictory story in the face of these external pressures. The per capita disposable income in the country has exploded by 38% since 2018, showing their strong domestic growth. The PBOC will release its monthly benchmark loan prime rate decision on April 21. This decision has potential astronomical implications on the nation’s economic conditions.
The upcoming Shanghai Auto Show, scheduled from April 23 to May 2, reflects China’s commitment to promoting domestic industries and innovation. Events like this are important for demonstrating China’s rapidly modernizing technological and manufacturing capabilities.
Moreover, China recently hosted what it claims to be the “world’s first humanoid robot half marathon” in Beijing on April 19. Through events like this, China demonstrates a sharp technological prowess. Just as importantly, they go much further to spell out the country’s long-term ambitions on the global stage.
As tensions have escalated with the U.S., Xi has been increasingly adamant about protecting national face and stubbornness. On the 70th anniversary of China’s Communist Party rule, he declared that “no force can stop the Chinese people and the Chinese nation.” This declaration is consistent with Xi’s goal to steer China through external difficulties without losing China’s autonomy.
In the last few months, there have been key reversals in China’s trade diplomacy. The country has reformed its commerce ministry’s trade negotiating team. This historic shift reflects a new diplomacy driven by the realities of an increasingly interconnected, interdependent, and vulnerable world. Southeast Asia has emerged as China’s largest trading partner, surpassing both the European Union and the United States, further illustrating the region’s growing importance in China’s economic strategy.
And the new economic climate due to the pandemic has exposed stark differences in tariff policies. This is how the U.S. has exempted certain China-made electronics from the worst (i.e., most economically harmful) tariff rates. This decision is intended to protect American consumers and businesses that use these products. This more selective approach indicates a more sophisticated orientation as both countries deal with their own domestic economic headwinds.
The yield is closely watched by investors as China’s benchmark 10-year government bond. It was most recently seen at 1.639%. This enormous figure belies widespread market pessimism and a deteriorating medium-term crystal ball inside China.