If you say the name Donald Trump in the halls of wholesale markets and trade fairs in China, you'll hear a faint chuckle. The US president and his 145% tariffs have not instilled fear in many Chinese traders. Instead, they have inspired an army of online Chinese nationalists to create mocking memes in a series of viral videos and reels – some of which include an AI-generated President Trump, Vice-President JD Vance and tech mogul Elon Musk toiling on footwear and iPhone assembly lines. China is not behaving like a nation facing the prospect of economic pain and President Xi Jinping has made it clear that Beijing will not back down. "For more than 70 years, China has always relied on self-reliance and hard work for development… it has never relied on anyone's gifts and is unafraid of any unreasonable suppression," he said this month. His confidence may come in part because China is far less dependent than it was 10 years ago on exports to the US. But the truth is Trump's brinkmanship and tariff hikes are pushing on pressure points that already exist within China's own struggling economy. With a housing crisis, increasing job insecurity and an ageing population, Chinese people are simply not spending as much as their government would like. Xi came to power in 2012 with a dream of a rejuvenated China. That is now being severely tested – and not just by US tariffs. Now, the question is whether or not Trump's tariffs will dampen Xi's economic dreams, or can he turn the obstacles that exist into opportunities? With a population of 1.4 billion, China has, in theory, a huge domestic market. But there's a problem. They don't appear willing to spend money while the country's economic outlook is uncertain. This has not been prompted by the trade war – but by the collapse of the housing market. Many Chinese families invested their life savings in their homes, only to watch prices plummet in the last five years. Housing developers continued to build even as the property market crumbled. It's thought that China's entire population would not fill all the empty apartments across the country. The former deputy head of China's statistics bureau, He Keng, admitted two years ago that the most "extreme estimate" is that there are now enough vacant homes for 3 billion people. Travel round Chinese provinces and you see they are littered with empty projects – lines of towering concrete shells that have been labelled "ghost cities". Others have been fitted out, the gardens have been landscaped, curtains frame the windows, and they appear filled with the promise of a new home. But only at night, when you see no lights, can you tell that the apartments are empty. There just aren't enough buyers to match this level of construction. The government acted five years ago to restrict the amount of money developers could borrow. But the damage to house prices and, in turn, consumer confidence in China, has been done and analysts have projected a 2.5% decline in home prices this year, according to a Reuters poll in February. And it's not just house prices that worry middle-class Chinese families. They are concerned about whether the governmentcan offer them a pension– over the next decade, about 300 million people, who are currently aged 50 to 60, are set to leave the Chinese workforce. According to a 2019 estimate by the state-run Chinese Academy of Social Sciences, the government pension fund could run out of money by 2035. There are also fears about whether their sons, daughters and grandchildrencan get a jobas millions of college graduates are struggling to find work. More than one in five people between the ages of 16 and 24 in urban areas are jobless in China, according to official data published in August 2023. The government has not released youth unemployment figures since then. The problem is that China cannot simply flip a switch and move from selling goods to the US to selling them to local buyers. "Given the downward pressure on the economy, it is unlikely domestic spending can be significantly expanded in the short term," says Prof Nie Huihua at Renmin University. "Replacing exports with internal demand will take time." According to Prof Zhao Minghao, deputy director of the Center for American Studies at Fudan University, "China does not have high expectations for talks with the Trump administration… The real battleground is in the adjustment of China's domestic policies, such as boosting domestic demand." To revive a slowing economy, the government has announced billions in childcare subsidies, increased wages and better paid leave. It has also introduced a $41bn programme offering discounts on items such as consumer electronics and electric vehicles (EVs) to encourage more people to spend. But Prof Zhang Jun, the Dean of Economics at Fudan University, believes this is not "sustainable". "We need a long-term mechanism," he says. "We need to start increasing residents' disposable income." This is urgent for Xi. The dream of prosperity he sold when he took power 13 years ago has not become reality. Xi is also aware that China has a disheartened younger generation worried about their future. That could spell bigger trouble for the Communist Party: protests or unrest. A report by Freedom House's China Dissent Monitor claims that protests driven by financial grievances saw a steep increase in the last few months. All protests are quickly subdued and censored on social media, so it is unlikely to pose a real threat to Xi for now. "Only when the country does well and the nation does well can every person do well," Xi said in 2012. This promise was made when China's economic rise looked unstoppable. It now looks uncertain. Where the country has made huge strides over the past decade is in areas such as consumer electronics, batteries, EVs and artificial intelligence as part of a pivot to advanced manufacturing. It has rivalled US tech dominance with the chatbot DeepSeek and BYD, which beat Tesla last year to become the world's largest EV maker. Yet Trump's tariffs threaten to throw a spanner in the works. The restrictions on the sale of key chips to China, including the most recent move tightening exports from US chip giant Nvidia, for instance, are aimed at curbing Xi's ambitions for tech supremacy. Despite that, Xi knows that Chinese manufacturers are at a decades-long advantage, so that US manufacturers are struggling to find the same scale of infrastructure and skilled labour elsewhere. President Xi is also trying to use this crisis as a catalyst for further change and to find more new markets for China. "In the short term, some Chinese exporters will be greatly impacted," says Prof Zhang. "But Chinese companies will take the initiative to adjust the destination of exports to overcome difficulties. Exporters are waiting and looking for new customers." Donald Trump's first term in office was China's cue to look elsewhere for buyers. It has expanded its ties across South East Asia, Latin America and Africa – and a Belt and Road trade and infrastructure initiative shored up ties with the so-called Global South. China is reaping the rewards from that diversification. More than 145 countries do more trade with China than they do with the US, according to the Lowy Institute. In 2001, only 30 countries chose Beijing as their lead trade partner over Washington. As Trump targets both friend and foe, some believe Xi can further upend the current US-led world order and portray his country as a stable, alternative global trade partner and leader. The Chinese leader chose South East Asia for his first trip abroad after the tariff announcement, sensing his neighbours would be getting jittery about Trump's tariffs. Around a quarter of Chinese exports are now manufactured or shipped through a second country including Vietnam and Cambodia. Recent US actions may also present a chance for Xi to positively shape China's role in the world. "Trump's coercive tariff policy is an opportunity for Chinese diplomacy," says Prof Zhang. China will have to tread carefully. Some countries will be nervous that products being manufactured for the US could end up flooding into their markets. Trump's tariffs in 2016 sent a glut of cheap Chinese imports, originally intended for the US, into South East Asia,hurting many local manufacturers. According to Prof Huihua, "about 20% of China's exports go to the US - if these exports were to flood any regional market or country, it could lead to dumping and vicious competition, thereby triggering new trade frictions". There are barriers to Xi presenting himself as the arbiter of free trade in the world. China has subjected other nations to trade restrictions in recent years. In 2020, after the Australian government called for a global inquiry into the origins and early handling of the Covid pandemic, which Beijing argued was a political manoeuvre against them, China placed tariffs on Australian wine and barley and imposed biosecurity measures on some beef and timber and bans on coal, cotton and lobster. Some Australian exports of certain goods to China fell to nearly zero. Australia's Defence Minister Richard Marles said earlier this month that his nation will not be "holding China's hand" as Washington escalated its trade war with Beijing. China's past actions may impede Xi's current global outreach and many countries may be unwilling to choose between Beijing and Washington. Even with all the various difficulties, Xi is betting that Beijing will be able to withstand any economic pain longer than Washingtonin this great power competition. And it does appear that Trump has blinked first, last week hinting at a potential U-turn on tariffs, saying that the taxes he has so far imposed on Chinese imports would "come down substantially, but it won't be zero". Meanwhile, Chinese social media is back in action. "Trump has chickened out," was one of the top trending search topics on the Chinese social media platform Weibo after the US president softened his approach to tariffs. Even if or when talks do happen, China is playing a longer game. The last trade war forced it to diversify its export market away from the US towards other markets – especially in the Global South. This trade war has China looking in the mirror to see its own flaws – and whether it can fix them will be up to policies made in Beijing, not Washington. Top picture credit: Getty Images BBC InDepthis the home on the website and app for the best analysis, with fresh perspectives that challenge assumptions and deep reporting on the biggest issues of the day. And we showcase thought-provoking content from across BBC Sounds and iPlayer too. You can send us your feedback on the InDepth section by clicking on the button below.
Xi's dream may be dying and Trump is not his biggest problem
TruthLens AI Suggested Headline:
"China Faces Economic Challenges Amid U.S. Tariff Pressures and Domestic Issues"
Bbc News
7.4
TruthLens AI Summary
In recent discussions among Chinese traders, the mention of Donald Trump and his aggressive tariff policies elicits laughter rather than fear. Many Chinese nationalists have taken to social media to create humorous content mocking Trump and his administration, suggesting a sense of resilience within the Chinese market despite the economic pressures imposed by the U.S. President. Xi Jinping's administration has publicly asserted its commitment to self-reliance and hard work, emphasizing that China is unafraid of external pressures. While the country has become less dependent on U.S. exports compared to a decade ago, it faces significant internal challenges, including a housing market crisis, rising job insecurity, and an aging population. These factors are causing consumer spending to stagnate, which undermines Xi's vision of a rejuvenated China. The housing crisis, in particular, has left many families disillusioned as they watch the value of their investments plummet, further dampening economic confidence. The government’s previous efforts to limit developer borrowing have not yielded the intended results, leading to a projected decline in housing prices and raising concerns about the pension system's sustainability as millions approach retirement age without adequate support.
As Xi navigates these economic challenges, he is focused on stimulating domestic demand to counteract the impact of U.S. tariffs. The government has announced various initiatives, including childcare subsidies and incentives to boost consumer spending. However, experts warn that these measures may not be sustainable in the long term without a structural shift to increase disposable income among residents. The uncertainty surrounding China's economic future has fostered a discontented younger generation, which poses a risk of social unrest. Despite these challenges, Xi is attempting to leverage the current situation to reshape China's role in global trade. By diversifying its export markets and strengthening ties with countries across Southeast Asia, Latin America, and Africa, China aims to reduce its reliance on the U.S. market. The ongoing trade tensions may also present an opportunity for Xi to position China as a stable alternative in global trade, even as past actions complicate its diplomatic outreach. Ultimately, while Trump's tariffs present immediate challenges, they are also prompting China to reflect on its internal policies and adapt its economic strategy for future resilience.
TruthLens AI Analysis
The article examines the current economic and political landscape in China under Xi Jinping, particularly in light of the ongoing trade tensions with the United States, specifically the tariffs imposed by Donald Trump. It highlights the resilience of the Chinese economy and the nationalistic sentiments that are emerging among its citizens, contrasting this with the significant internal challenges facing the country.
Perception of Economic Resilience
There is an emphasis on the idea that China is not as vulnerable to Trump’s tariffs as it might have been in the past. The narrative suggests that the domestic market, while large, is currently restrained by consumer uncertainty due to economic instability, particularly the housing market collapse. The article seeks to project an image of a confident China that is less dependent on foreign markets, especially the United States.
Challenges Faced by Xi Jinping
While Xi's vision of a rejuvenated China is under scrutiny, the article suggests that the challenges are multifaceted and go beyond external pressures. The focus on internal economic struggles, such as job insecurity and a declining housing market, raises questions about the sustainability of Xi's policies and ambitions. It hints at a broader narrative that Xi’s economic dreams might be faltering due to these internal realities.
Public Sentiment and Nationalism
The piece notes a rise in online nationalism among the Chinese populace, which could be seen as a reaction to external pressures. This suggests that the government might leverage this sentiment to maintain stability and support for its policies. The use of memes and humor among Chinese traders signifies a cultural resilience, but it also reflects a coping mechanism in the face of economic uncertainty.
Potential Manipulation
The article could be seen as aiming to shape public perception by presenting a narrative that minimizes the impact of U.S. tariffs while emphasizing internal issues. This could be interpreted as an attempt to bolster national pride and distract from the economic challenges. The language used may elicit a sense of defiance among Chinese citizens, potentially serving the government's agenda to cultivate a more unified front against perceived foreign threats.
Trustworthiness of the Information
The reliability of the article hinges on its balanced portrayal of both external and internal factors affecting China's economy. While it offers a critical view of Xi's challenges, it may also downplay the severity of the economic issues at hand. This could lead to a more optimistic interpretation of the situation than warranted, thereby affecting trust in the overall narrative.
Impact on Global Dynamics
This article may contribute to a larger conversation about the shifting balance of power in global economics. As China continues to assert itself despite challenges, it may influence markets and political strategies worldwide. Investors and policymakers could view this narrative as indicative of potential resilience in the Chinese economy, which might affect international stock markets and investment strategies.
Target Audience
The article appears to cater to readers interested in international relations, economics, and political analysis. It speaks to those who are keen on understanding the dynamics between China and the United States, as well as the internal pressures facing Xi's administration.