China's export-driven economy faces renewed pressure as the China-US trade war intensifies under the Trump 2.0 administration. Tariffs on Chinese goods now exceed 145%, while China retaliates with rates up to 125% on US imports. This escalation threatens the global trading system, with the combined GDPs of both nations making up over 40% of the world economy.
Export-heavy provinces like Zhejiang and Guangdong have been hit hardest. These regions, filled with private manufacturing enterprises, are experiencing falling output, factory shutdowns, and overstocked warehouses. The trade war's impact risks affecting 180 million people across China's trade-linked sectors.
While China maintains a firm stance, companies are adjusting. Many are seeking to diversify exports beyond the US, targeting ASEAN, the EU, and emerging markets. ASEAN has become China's top trading partner, with bilateral trade exceeding 16% of China's total foreign trade. However, countries like Brazil and Indonesia are beginning to restrict Chinese imports, making expansion difficult.
Firms are also shifting towards the domestic market, encouraged by government support. Yet challenges remain: products made for export do not always suit domestic tastes, and weak consumer confidence limits spending. Rising youth unemployment and economic uncertainty compound the issue.
Experts say rebalancing towards domestic consumption is essential. However, without structural reforms, such as changes to state-owned enterprises, pensions, and the household registration system, spending will remain constrained. Establishing a unified national market is also crucial to overcoming internal barriers.
Despite short-term resilience, China must enact bold reforms to secure long-term stability. The trade war may offer the push needed, but the "clock is ticking".
Source: www.thinkchina.sg