Analysis
China safeguards itself against US trade war: ‘The sky won’t fall’
Unconfirmed rumors have been circulating for days about a possible extension of China’s cross-border digital payment system in renminbi for Asean and Middle Eastern countries, aiming to undermine the dominance of the dollar.
There will be pain, but in the end we will be free: that was the gist of the long-awaited front page editorial in the People's Daily analyzing the trade war.
After the Qingming holiday, the official mouthpiece of the Communist Party elaborated on China's view of the new tariff battle started by Donald Trump: “The U.S. abuse of tariffs will have an impact on China, but the sky will not fall,” it reads, although looking at Monday’s market performance one might suspect otherwise.
In the first day of trading after Beijing's announcement of counter-tariffs, the Hong Kong Stock Exchange tumbled 13.22 percent, its worst performance since the 1997 Asian financial crisis. The most significant signal of domestic concern, however, comes from the Shanghai and Shenzhen stock markets, less exposed to the global financial market than the former British colony, which fell -7.34 percent and -10.79 percent respectively.
China’s main state fund, Central Huijin Investment, immediately intervened by increasing its holdings in market-traded funds to “resolutely safeguard” the stability of the capital market. That won’t be enough, however, especially if Trump follows through on his threat to add an additional 50 percent in tariffs if Beijing doesn’t withdraw its counter-tariffs. The latter won’t happen while both powers are engaged in a tug-of-war in which Xi Jinping doesn’t want to show any weakness, since “appeasing a bully only emboldens further aggression.”
The risk of an out-of-control escalation is as real as ever. But the People's Daily is trying to urge the Chinese to keep a cool head: “Although international markets generally consider the US tariff abuse to be beyond expectations, the CPC Central Committee has anticipated this new round of US economic and trade suppression against China, fully estimated its potential impact, and prepared adequate response plans with sufficient lead time and margin.” The response measures mentioned include the increase of the deficit to 4 percent of GDP, the loosening of monetary policy and the great consumption stimulus plan, also hinting that more measures will come to protect the economy.
“Strangulation and suppression tactics will only force China to accelerate core technology breakthroughs in key areas,” the Party outlet continued. The logic seems clear, although making it a reality won’t be that simple. There will be problems in the short term, but if China is able to “turn pressure into motivation,” the problem will become “a strategic opportunity to accelerate the construction of a new development pattern” that is less dependent on exports – and thus less exposed to sanctions, tariffs and supply restrictions, bringing the Holy Grail of self-sufficiency closer. “The share of our exports to the U.S. has declined from 19.2 percent in 2018 to 14.7 percent in 2024,” Beijing boasted, calling on its BRICS partners to oppose the “unilateral protectionism” of the U.S.
Unconfirmed rumors have been circulating for days about a possible extension of China’s cross-border digital payment system in renminbi for Asean and Middle Eastern countries, aiming to undermine the dominance of the dollar. According to the People's Bank's latest announcement on the subject in October, a pilot project was set up involving Hong Kong, Thailand, Saudi Arabia and the United Arab Emirates, enabling them to make payments with central bank digital currencies through blockchain technology, which allows transactions to be completed not in several days but in seconds, with a sharp cut in costs.
A representative of China's foreign ministry said on Monday that the unilateral imposition of tariffs by the United States “effectively deprives countries, particularly those in the Global South, of their right to development,” reviving the country’s strategy of wooing emerging economies. But for now, under the tariffs announced so far alone, China is likely to lose 0.7 percent of GDP growth in 2025. It will not be easy to “weather the storms together” until the waters are less turbulent.
Originally published at https://ilmanifesto.it/non-cadra-il-cielo-nella-guerra-a-trump-la-cina-scava-trincee on 2025-04-08