China takes steps to boost economy after Trump’s victory

Main restaurants

• China unveiled new measures to boost its economy as Donald Trump‘s second term approaches.
• The IMF forecasts growth of 4.8 percent in 2024, which is at the low end of Beijing‘s target of “around 5 percent” and is expected to decline further to 4.5 percent next year.
• China is allocating an additional 6 trillion yuan ($840 billion) by 2026 to support local governments struggling with unsustainable debts.

China’s economic challenges

China’s economic performance has declined since the pandemic. The country faces problems such as a collapse in the real estate sector, rising national debt, unemployment and low consumer spending. To deal with these problems, China new measures to stimulate the economy, despite concerns about a second term for Donald Trumpknown for its protectionist trade policies.

US taxes and their impact

Trump’s victory in the US elections is based on a campaign platform that includes imposing high tariffs on Chinese goods of up to 60 percent. This is a major threat to Xi Jinping‘s ambition to turn China into a technological superpower and could put more pressure on relations between the world’s two largest economies. During his first term, Trump imposed tariffs of up to 25 percent on Chinese imports, which greatly damaged the Chinese economy.

Economic recovery and IMF forecasts

While the Biden administration continued, expanded, and in some cases strengthened these measures after Trump’s departure, China is now in a more precarious position. The economic recovery following the sudden lifting of strict Covid restrictions two years ago has lagged behind expectations. As a result, China has become a recurring source of disappointing economic news.

Debt and Government Stimulus

Even before Trump’s election win and the implementation of Chinese stimulus measures in September, the International Monetary Fund (IMF) lowered its growth forecast for China. The IMF now forecasts expansion of 4.8 percent in 2024, at the lower end of Beijing’s target of “around 5 percent.” This forecast is expected to decrease further to 4.5 percent next year.

Support for local authorities and the move to high quality development

China’s latest plan includes allocating an additional 6 trillion yuan ($840 billion) through 2026 to support local governments struggling with unsustainable debts. For decades, these governments have fueled economic growth by borrowing heavily, often to finance infrastructure projects. However, a downturn in the property sector has left some municipalities struggling to meet their financial obligations.

China’s ambitions and challenges

Some economists warn that China cannot rely on exports alone to overcome its current challenges. They point to Japan’s experience after the stock and property bubble burst in the 1990s and emphasize the risk of long-term stagnation. To avoid this fate, they recommend harnessing untapped consumer demand and moving away from export-led growth and investment. This approach can not only promote more sustainable growth, but also reduce trade tensions and China’s vulnerability to external shocks.

China is thriving in exporting high technology

China’s ambitions extend beyond cheap production. The country is actively seeking similar success in high-tech exports, becoming a global market leader in solar panels, electric vehicles (EVs) and lithium-ion batteries. The International Energy Agency (IEA) reports that China controls at least 80 percent of global solar panel production and is the largest manufacturer of EVs and their batteries. Investments in clean energy make up a third of the world total and show remarkable progress in expanding renewable capacity.

Opposition to Western countries

This progress has helped reduce the economic impact of China’s ongoing real estate crisis. However, the increase in exports has also led to resistance from Western countries, including the US and the European Union, which are increasingly accepting of Chinese goods.

A pressing issue for Beijing

As Trump prepares to return to the Oval Office with a pledge to curb Chinese imports, Beijing faces a crucial question: Will its latest economic stimulus measures be enough to meet these formidable challenges?

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