Last year was a “relatively quiet if depressing” one for China, says James Palmer in Foreign Policy. This year could be “a lot stormier”, especially when it comes to relations with the US. With Donald Trump about to start a second term as US president and threatening to saddle China with tariffs of 60%, the “leadership in Beijing is readying for a ferocious economic struggle”.
It is not in a good place for a trade war, says William Pesek in Nikkei Asia. Although China under Xi Jinping has made progress in transitioning from cheap exports to higher-value sectors, Xi has “slowed things down by prioritising control over change”. Cracks in the economy include manufacturing overcapacity, the ongoing property crisis, “shaky” local government finances which are hindering investment, record unemployment and falling confidence.
Xi Jinping's three-pronged US strategy
China has plenty of leverage – the US imports roughly $430 billion annually from China and exports close to $150 billion – and it is sending a clear signal that it is ready to strike back, says Alexandra Stevenson in The New York Times.
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On 2 January, China added 28 American firms to an export control list. It has also announced an antitrust probe into Nvidia and banned the export of rare minerals to the US.
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Xi’s planned three-pronged US strategy – “retaliation, adaptation and diversification” – is defined by “clarity and determination”, adds Evan Medeiros in the Financial Times. Though the effects have been patchy, “vigorous fiscal and monetary stimulus to help businesses and now consumers” began in late 2023 with a “possible trade war in mind”. Beijing is considering unilateral tariff cuts on imports from non-US partners. Nevertheless, China’s economic crisis hasn’t changed Xi’s “commitment to a directed economy and officials’ unwillingness to tell him no”, says Palmer. He has reportedly said that he “doesn’t see what’s so bad about deflation”. If Trump’s tariffs don’t lead to a “rethink”, they could ironically help Xi by providing a “convenient scapegoat” for public anger.
This stand-off couldn’t come at a worse time, says Thomas Friedman in The New York Times. The world faces “three epochal challenges” – “runaway artificial intelligence, climate change and spreading disorder from collapsing states”. The US and China are the world’s two AI superpowers, two leading carbon emitters and have the two largest navies – in other words, they are the only powers that offer any hope of addressing these challenges. We need an “updated Shanghai Communiqué” (the Nixon-Zedong era document which set out the principles for the normalisation of US-China relations).
That would help govern the new realities and ensure that AI cannot be “used for destructive purposes by bad actors”. Strategies to get the world to net zero by 2050 are also needed to reduce the effects of climate change, which will increase disorder in failing states, an issue that constitutes a “big common enemy”. From Syria to Venezuela, “more and more nation-states are falling apart” with migrants “scrambling to get to zones of order”. “If competition and collaboration give way entirely to confrontation, a disorderly 21st century awaits.”
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