When Donald Trump enters the White House for the second time on 20 January, the view from the Oval Office will look very different to the one he encountered in 2017. A pandemic, the war in Ukraine and a trade war with China have caused ripples through the global economy that are still being felt midway through the decade.
Beijing will be watching closely. Trump has promised to impose tariffs of up to 60% on Chinese imports, partly in retaliation for the flow of fentanyl from China to the US.
The specifics of Trump’s China policies are yet to be announced. And Beijing has had time to prepare for increased tariffs, by building up trade relationships with small economies and moving supply chains to third countries, especially Russia. Bilateral trade between China and Russia reached a record $237bn in 2024.
But none of this will be enough to offset falling demand from the US. With weak domestic demand and a structural rebalancing in major industries, the Chinese economy is far more reliant on exports than it was in 2017.
Growth figures
China’s economy is growing at a slower pace than when Trump first took office. In 2016, the official GDP growth figure was 6.7%, itself considered a record slowdown. For 2024, the government said that the economy grew by 5%, in line with the official target.
The days of double-digit growth in the Chinese economy are long gone – which is to be expected as the country transitions into a more developed economy.
Economists have long argued that China’s actual growth figures are much lower than the official statistics suggest. Analysts at Rhodium, a research company, estimate that the actual growth figure for last year was as low as 2.4%. Economists polled by Reuters put their estimate closer to the official number, at 4.9%.
Trade balance
China’s GDP growth has been kept afloat at least in part by a massive exports boom. Last year, China’s trade surplus reached nearly $1tn – a record high. That was boosted by a surge in exports in December, which some experts say indicated a rush of Chinese exporters trying to ship their goods before Trump takes office.
Despite the trade war, China’s trade surplus has increased in recent years. In 2018, it was around one-third of what it is today. The US remains an important market. In 2018, it was the top destination for Chinese exporters. In 2024, the US was second only to south-east Asia as a market, reflecting China’s increasing ties with its regional neighbours and the fact that many companies have moved their supply chains out of China in order to continue trading with the US.
That fact demonstrates the limits of bilateral sanctions. “A lot of what is called trade with the global south is basically trade with the US structured in a way to get around tariffs,” said Brad Setser, a senior fellow at the Council on Foreign Relations. “Trade through south-east Asia is just an illustration that it is very difficult to cut a country out of the integrated global economy.”
Real estate
Part of the reason that China’s economy has become so reliant on exports is the government’s crackdown on real estate, the sector which historically accounted for between one-quarter and one-third of total GDP.
In August 2020, Beijing unleashed the “Three Red Lines” policy, aimed at cooling the overheated housing market. Xi Jinping, China’s president, had long said that houses were for living in, not speculation.
The regulations limited the amount of debt and liabilities than property developers could hold. But without easy access to financing, and combined with Covid-related lockdowns limiting construction activities, property developers stalled on building about 20m pre-sold apartments. Homebuyers protested in their thousands and many staged mortgage boycotts, creating ripple effects throughout the economy.
The government has since eased some of the restrictions in a bid to halt the downward spiral of the sector. But policymakers have made it clear that they intend to refocus China’s economy on “new quality productive forces” – meaning hi-tech, innovative sectors – and not on bricks and mortar. Investment in real estate remains 25% down from its peak in June 2021.
Impact of the pandemic
In 2023, as China emerged from its harsh zero-Covid regime, many observers expected a roaring economic comeback.
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But the anticipated recovery never arrived. The economy grew by just over 5% in 2023, below expectations although slightly more than the official target.
Experts worry about a crisis of consumer confidence. China’s household spending accounts for less than 40% of GDP, well below global averages. The pandemic appears to have increased people’s sense of uncertainty about the future. A 2024 survey by the People’s Bank of China found that 62% of people wanted to increase their savings rather than consumption or investment, up from 44% in the same period in 2018.
The same survey found that in 2024, 10% of people felt positive about China’s employment situation, down from 16% in 2018.
“The slowdown in China’s economy is structural,” said Logan Wright, a partner at Rhodium. “It reflects the end of an investment-led growth model and the inability to use the financial system at this stage or fiscal policy to effectively counter the slowdown in domestic demand.”
Speaking at an event in London on Thursday, Keyu Jin an associate professor at the London School of Economics, said that the “central dilemma” for policymakers was “how can you stimulate growth without reigniting a debt explosion”.
Green economy
A bright spot in China’s economy over the past decade has been the rapid growth of green technologies. Buoyed up by an abundance of natural resources and strong government support, clean energy industries such as electric vehicles, lithium batteries and solar have boomed in recent years.
In 2017, China produced about 800,000 EVs, according to the China Association of Automobile Manufacturers. In the first 11 months of last year, the number of EVs produced hit 11.4m.
Analysis by the Centre for Research on Energy and Clean Air found that investment in the “new three” industries of solar power, batteries and EVs accounted for 40% of GDP expansion in 2023. A similar share can be expected for 2024.
Talking about the economy
The Chinese government is well aware of the strains that the economy is under. But it is worried that bad vibes won’t help. In the past year, there has been a concerted effort to crack down on anyone spreading negativity about China’s economy. Influencers and prominent commentators have been instructed not to “bad-mouth the economy”. Senior commentators are learning to toe the line. Earlier this month, the Wall Street journal reported that Gao Shanwen, a prominent economist, had been placed under investigation after he made comments at an event in Washington DC questioning China’s official growth figures.
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