The impact of China\u2019s aggressive trade policies is magnified by the deficiencies within its domestic economy, which is plagued by weak demand, the continuing implosion in its property sector and industrial over-capacity. That\u2019s reflected in the flat-lining of its imports.<\/p>\n
Xi Jinping has steadfastly refused to do what most economists outside China, and some within, have been advocating for years \u2013 which is to attempt to significantly boost domestic consumption.<\/p>\n
![\"France\u2019s](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/12\/518cfcf23cdd59b3488d166d91ea784e097da484.jpeg\")
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France\u2019s President Emmanuel Macron with President Xi Jinping at his state visit to China last week. Credit: Getty Images<\/p>\n
Despite the years of the property-crisis-induced domestic economic weakness<\/a>, Beijing has only tinkered with measures to stimulate demand, instead maintaining its centrally directed and subsidised quest for global industrial dominance.<\/p>\n China\u2019s exports are equivalent to about 0.9 per cent of global GDP and, in a world where global trade is growing at or just above 2 per cent, it is tearing market share in traded goods away from the rest of the world, while offering little in return as it pursues Xi\u2019s strategy of growth via exports while achieving self-sufficiency in its home markets. Xi argues against protectionism abroad while effectively practising it at home.<\/p>\n By pursuing such a narrow and aggressive \u201cbeggar thy neighbour\u201d policy, swamping other markets while closing its own, China is inviting a response from the trading partners it increasingly relies on for growth.<\/p>\n Xi Jinping has steadfastly refused to do what most economists outside China, and some within, have been advocating for years \u2013 which is to significantly boost domestic consumption.<\/p>\n Trump missed an opportunity by discarding the Biden administration\u2019s targeted tariffs on China and igniting a trade war with almost the entire non-US world.<\/p>\n Had he enlisted the EU and others whose economies were being threatened by China\u2019s exports, it would have forced China to confront the imbalances in its own economy instead of, together with the US, exacerbating those within the global economy.<\/p>\n Trump also misdiagnosed America\u2019s problem, which isn\u2019t the trade deficits it has run for the past 50 years but a lack of savings relative to its investment and consumption. He should have focused on America\u2019s domestic economic settings \u2013 where he expanded those imbalances during his first term and is doing it again in his second<\/a> \u2013 rather than looking elsewhere for someone to blame.<\/p>\n In any event, Trump\u2019s tariffs have up-ended and are re-making global trade routes and China\u2019s centrally planned and heavily subsidised strategic manufacturing sectors are pouring exports increasingly above domestic demand into international markets.<\/p>\n Loading<\/p>\n The effect of those settings is being amplified by a managed currency that is loosely pegged to a US dollar whose value has slumped almost 10 per cent since Trump regained office in January. In effect, that has produced a 13 per cent devaluation of the yuan against the euro, making China\u2019s exports to Europe even more competitive.<\/p>\n No wonder the Europeans are anxious and talking about trying to stem the tide through their own protectionist measures. They\u2019re talking about tariffs, quotas and minimum local content levels for their industries, and exchanging technology transfers and investment from China for access to their markets.<\/p>\n Xi has been advocating efforts to reduce over-capacity and endless price wars within China\u2019s markets, but the objective seems to be about making Chinese industry and its exporters more efficient, less wasteful of national capital and to try to head off incipient deflation than to produce a more balanced economy.<\/p>\n Effectively, China has doubled down on an export-driven economic strategy, despite Trump\u2019s tariffs.<\/p>\n Should the rest of the world decide that in a global trade environment fragmented by this combination of US protectionism and Chinese mercantilism, it will have fewer imports and higher domestic prices to protect jobs and a manufacturing future \u2013 Xi\u2019s policies could backfire on China.<\/p>\n