China has introduced a series of new measures aimed at reviving its struggling economy as it faces the prospect of a second term for former U.S. President Donald Trump. The country is set to tackle massive local government debt in an effort to prevent it from further hindering economic growth.
Trump’s victory in the U.S. presidential election has raised concerns in Beijing, particularly over his pledge to implement steep tariffs on Chinese-made goods, with some estimates suggesting tariffs could reach as high as 60%. This potential trade conflict is expected to undermine Chinese President Xi Jinping’s ambitious plan to transform the country into a global technology leader, further straining relations between the world’s two largest economies.
China’s economic recovery has faced significant challenges since the pandemic, with a property slump, rising government debt, and increasing unemployment slowing growth. Low consumer demand has compounded these problems, leading to a sharp decline in economic activity. Against this backdrop, the latest economic measures, announced by the Standing Committee of the National People’s Congress (NPC), are seen as crucial to stabilizing the economy.
Trump’s trade policies during his first term were already painful for China, with tariffs on Chinese goods reaching as high as 25%. Experts like China analyst Bill Bishop suggest that Trump’s return to the White House would likely result in an escalation of tariffs, particularly if he believes that China has not fulfilled its trade commitments. “I think we should believe that he means it when he talks about tariffs,” said Bishop. “He sees China as having reneged on his trade deal and thinks China and Covid cost him the 2020 election.”
While the U.S.-China trade tensions didn’t subside after Trump left office in 2021, with the Biden administration maintaining and even expanding some tariffs, China is now in a more vulnerable position. The economy has struggled to return to pre-pandemic growth levels, especially after abandoning strict Covid restrictions two years ago. Instead of a quick recovery, the country has experienced ongoing economic disappointments.
The International Monetary Fund (IMF) has downgraded its growth forecast for China, now expecting a modest 4.8% expansion in 2024, below Beijing’s target of “about 5%”. The IMF’s projection for 2025 suggests even slower growth, with an anticipated rate of just 4.5%.
In response, China’s latest plan includes an injection of 6 trillion yuan ($840 billion) between now and 2026 to help local governments manage their growing debt burdens. For years, local governments have relied on borrowing to finance infrastructure projects, but a downturn in the property sector has left many cities unable to meet their financial obligations. The new measures aim to alleviate this crisis and support economic stability as the country navigates increasingly turbulent global economic conditions.
