China Across CSIS: China Weathers the Storm of U.S. Tariffs
Apr 17, 2025
19:58
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Quick takeaways
Despite facing economic challenges, China is working towards self-reliance in technology and shifting to a consumer-driven economy.
The ongoing U.S.-China trade war has significantly altered trade dynamics, with China reducing its export dependence on the U.S. market.
Deep dives
Current Economic Condition in China
China's economy has experienced significant challenges in recent years, particularly following the pandemic and widespread lockdowns that drastically slowed growth. Despite government efforts to stimulate industry and manufacturing, the rebound anticipated in 2023 did not fully materialize, with the economy growing only at an official rate of 5%. A notable aspect of this economic landscape is the stark contrast between China's substantial trade surplus and its domestic demand, which has often relied heavily on exports. However, there are signs of stabilization, including increased consumption and private investment, although the structural issues affecting the economy remain pressing concerns.
Impact of U.S. Tariffs on China
The trade relationship between the U.S. and China has evolved, with China's export dependence on the U.S. decreasing over time, now comprising about 14% of total exports compared to 20% five years ago. Despite this, ongoing tariffs continue to pose challenges for Chinese businesses, affecting their profit margins and customer bases. Some companies have attempted to circumvent these tariffs by investing in countries like Vietnam and India, but they face difficulties due to structural limitations in those markets. The tariffs not only impact the economy but also influence public confidence in the government, creating a complex dynamic for Chinese leadership.
China's Long-Term Strategies Amidst Instability
China is actively pursuing strategies to enhance its self-reliance in technology while simultaneously decreasing reliance on foreign markets, particularly as it navigates ongoing economic instability. The government's focus on advancing artificial intelligence and reducing the role of real estate in the economy shows a desire to elevate its global standing. Furthermore, the necessity to shift from state-owned enterprises to more consumer-driven economic models is becoming apparent, driven by external pressures. This transformation could lead to significant political and economic adjustments, as the government balances the need for growth with the imperative to avoid an economic crisis.
In this special episode from The Truth of the Matter from CSIS, host Andrew Schwartz speaks with Scott Kennedy, CSIS senior adviser and Trustee Chair in Chinese Business and Economics, to discuss the latest in the U.S.-China trade war, including China’s technological capabilities, new export controls, and the possibility of future decoupling.
Original interview published on April 17, 2025.
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