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China is navigating trade tensions, industrial shifts, and global influence, with high-tech sectors like EVs and semiconductors driving growth. What policies will shape its future? Dan Wang and Yang Yao Peking University discuss.

Image courtesy of interviewee. January 12, 2025

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This video discusses the current state and future prospects of the Chinese economy, focusing on key challenges such as managing debt, fostering sustainable growth, and balancing trade tensions. The dialogue features insights from two experts, Dan Wang and Professor Yang, who address China's economic trajectory since the global financial crisis, the implications of government spending, and the effectiveness of infrastructure investments across various sectors.

Key points include:
- China's economy is navigating interconnected challenges, including high debt levels, risks in the real estate sector, and an aging population.
- There is debate over whether debt-financed growth is sustainable, with suggestions for a potential shift away from subsidized demand to boost domestic consumption.
- The importance of China's industrial policy and infrastructure spending is highlighted, along with the necessity for these investments to support high-tech and green technology sectors.
- Trade tensions with the US have prompted China to adapt its strategies, including retaliatory tariffs and efforts towards import substitution.
- The experts caution that rising geopolitical tensions will necessitate careful navigation of relationships with global players, particularly the US and EU.

The discussion concludes with reflections on how China's evolving economic strategies may foster self-reliance, while also considering the vulnerabilities created by its strong dependence on global supply chains. The emphasis is on the transformative potential of increased domestic investment and innovation amidst challenges presented by international sanctions and market dynamics.

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Here are five key points from the video regarding the future of the Chinese economy:

1. **Balancing Debt and Sustainable Growth**: China's economy is facing the challenge of balancing high debt levels, risks in the real estate sector, and an aging population while aiming for a stable growth rate of around 5%. Policymakers are tasked with crafting strategies to ensure sustainable economic growth amidst these interconnected challenges.

2. **Structural Adjustments and Domestic Demand**: The Chinese government has been focused on structural adjustments to counteract economic overleveraging and real estate risks. There is a shift in tone within government documents towards boosting domestic demand to sustain economic growth, indicating a potential pause in strict structural reforms in favor of stimulating consumption.

3. **Impact of Trade Tensions**: China's response to international trade tensions, particularly with the U.S. and Europe, has included measures like tariffs and import substitution strategies. The current domestic demand weakness could limit China's ability to retaliate effectively against sanctions, as previous retaliatory measures have become more symbolic than practical, particularly for smaller producers.

4. **Industrial Policy and Self-reliance**: China has increasingly focused on self-reliance in key industries, particularly semiconductors, in response to geopolitical pressures. The country aims to bolster its manufacturing capabilities, which is seen as both a necessity for economic stability and an opportunity to enhance its position on the global stage.

5. **Global Economic Relationships**: Navigating relationships with global powers such as the U.S. and EU is crucial for China's economic future. While there have been moves toward greater self-reliance, there is also recognition of the importance of international cooperation, investment, and maintaining favorable trade relations. Chinese companies are also exploring investments in more favorable markets, particularly in Europe and Southeast Asia, as a strategy to mitigate risks from U.S.-China tensions.

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Here are some key quotes from the video , summarizing the main themes and points discussed about the future of the Chinese economy:

1. **Economic Balancing**: "China's economy faces the daunting task of balancing its debt levels, real estate sector risks, and aging population while pursuing stability."

2. **Debt and Structural Adjustments**: "The government has been concentrated on... over leveraging of the economy... with the result of, the government structural adjustments... so it's already in the government's calculation."

3. **Growth Targets and Demand**: "China's economy is aiming for a 5% growth target, but questions arise about its sustainability over the next decade."

4. **Domestic Demand**: "We have too much just supply... So in China, if the government spends more... the demand cannot catch up with supply."

5. **Government Spending**: "When Chinese people don't want to consume, and Chinese companies don't want to invest, so what can we do? We have to ask the government to spend."

6. **Sector-Specific Investments**: "China's industrial policy and infrastructure spending has been... to fend off the threat from the US... all those industries have benefited greatly."

7. **Trade Responses**: "In the past, China has been adopting... similar measures as the US and Europe when it comes to tariffs."

8. **Self-Reliance and Innovation**: "Over the years, we see its kind of self-reliance rate increasing in China... it’s not a plan to make China just rely on itself for innovation."

9. **Geopolitical Tensions**: "Navigating relationships with the US, EU, and other global players will shape its economic future."

10. **Future Investment Dynamics**: "There are some positive signs... including the battery industry... some American companies coming back to China to invest."

These quotes capture the essence of the discussion regarding China's current economic challenges, policy responses, and future strategies in a changing global landscape.

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This week, we dive into the future of the Chinese economy,

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exploring how it is balancing debt,

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managing sustainable growth, navigating trade tensions,

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and reshaping its global economic role.

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Joining me today are two prominent voices in this field.

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Dan Wang was formerly the Chief Economist

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at Hansen Bank China.

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Based in Shanghai, Dan holds a PhD in economics from the

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University of Washington.

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Yang is a professor at the China Center

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for Economic Research

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and the National School of Development Pecking University.

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Welcome to you both. Let's begin with you, professor Ya.

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China's economy faces the daunting task

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of balancing its debt levels, real estate sector risks,

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and aging population while pursuing stability.

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These interconnected challenges require carefully crafted

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policies to ensure sustainable growth.

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How has China's debt evolved from the global financial

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crisis through 2016,

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and how do these levels compare to its GDP growth?

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Well, since, the financial crisis, in

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2008, the Chinese economy has gone

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through tremendous structural changes,

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and in general, the economy is, healthy to me,

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the fundamentals are some,

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but, of course, there have been problems,

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accumulated, over the years.

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Uh, so over the last, six to eight years,

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the government has been, concentrated, on

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correcting some of the, structural problems,

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for example, over leveraging of the economy, right?

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And also two big, the real is that the sector

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and many others, right?

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So, we see some slow down over the last several years.

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But, to me, that with the result of,

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the government structural adjustments,

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so it's already in the government's calculation, right?

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Uh, aging is a long-term challenge.

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Uh, I don't think, is a immediate challenge

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to the Chinese economy.

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China's economy is aiming for 5% growth target,

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but questions arise about its sustainability

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over the next decade.

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Balancing growth with structural reform is critical,

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but it may require shifting away from subsidized demand.

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Is debt finance growth still viable?

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Or does China need to reconsider its economy model?

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Is it the Chinese government that has been,

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realizing those, for quite a long time?

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As I just said, over the last several years,

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the government has been trying to,

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restructure the economy, right?

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Um, particularly the real is that the sector

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and also our leveraging, the local government, right?

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I, so to me, those adjustments,

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approaching, they're ending.

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So if you read,

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government documents over the last one month

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after, last year's economic conference,

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the tone has been changed, right?

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Uh, so, I think that this year,

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the government is going to

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probably tentatively leave structural adjustments aside

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and then concentrate on boosting domestic demand,

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in order to achieve, the target,

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around 5% growth rate.

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Can I push you a bit here, professor?

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Why doesn't high government spending correlate

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with high growth in China like it does?

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Say, for instance, in the us

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I, I wouldn't always associate high government spending

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with, high growth, right?

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The United States, is, really a spatial case

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because, United States enjoys,

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the advantages brought by dollar, right?

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We have to keep that in mind, okay?

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Pe, you know, people all over the world

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allow American dollars.

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That's unfortunate, right?

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But, that's the reality we have to take, right?

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So for other countries, I don't think, you're going

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to grow your economy by just printing money.

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But things are different in China, in current,

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e eCommerce situation in China is that,

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we don't have sufficient demand.

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Uh, we have too much just supply, okay?

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So in China, if the government spend more

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than I believe the economy is going to grow faster.

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Okay? So, so we are in this

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great imbalances, right?

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Uh, the demand cannot catch up with, supply,

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and we cannot just rely on export to grow China's economy.

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That's not the sustainable, last year, China's,

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surplus, in good trade

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was almost 1 trillion US dollars, 1 trillion US dollars.

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That's just too much. That's not sustainable.

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I mean, everyone in China is aware of that, right?

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So we have to boost the domestic demand.

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But, when Chinese people don't want to consume,

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and Chinese company don't want to invest, so what can we do?

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We have to ask the government to spend.

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So that's why, at least for the current China

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and more government spending is going to

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bring higher growth rates.

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If I can come to you, Dr. Wang. Yeah.

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Well, industrial profits in some sectors like manufacturing

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have declined others, such as EVs and semiconductors.

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Show promise. Infrastructure spending has been a cornerstone

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of China's growth, but its effectiveness varies by sector.

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Which sectors have benefited most from China's industrial

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and infrastructure investments?

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And how do policies proposed at the December work conference

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aim to address these challenges?

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Uh, China's industrial policy

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and infrastructure spending has been amazingly consistent in

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the past decade, and we can see that the priority now

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for the Chinese government is actually

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to fend off the threat from the us.

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And as a result, a lot

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of the resources have been reallocated to the manufacturing,

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the high-tech, the green technology.

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So all those industries have benefited greatly.

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And if we look at what has been said in the December Central

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economic war conference, the tone has been the same.

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And we need to keep in mind

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that this conference happens every December.

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So it's mostly to address the short-term economic

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concerns rather than the long-term.

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So the tone of this conference has to be aligned

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with China's long-term strategy, which is to be a stronger

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and richer country by 2035.

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And for the domestic economy, a lot

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of people have been crying for a higher cash transfer,

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for example, for, average Chinese families

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or more a boost for services effect,

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services, sector or consumption.

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But from the government perspective,

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this might be a priority maybe for some provinces,

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especially those, deeply in debt.

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But for the whole country, the

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priority list still would have manufacturing in the front.

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The, and for domestic companies,

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if they are in a sector like construction

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or engineering, they have benefited greatly,

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from the domestic spending

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and also overseas investment under the umbrella of Belt

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and Road Initiative, for companies in solar

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EVs battery production.

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They also have been benefited greatly from this policy

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support and the global market.

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And those companies are also mostly in the private sector.

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Um, but when we look at who's benefiting,

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in the upstream, and that's mostly like mining mineral,

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the natural resources,

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and these are mostly the SOEs,

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the state-owned enterprises.

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So the economic structure now is actually more skewed

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towards favoring the state sector

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and bigger companies, rather than smaller ones,

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Trade tensions and shifting global dynamics are shaping

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China's economic strategies.

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But I want us to think back to Trump 1.0 2015

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and the made in China 10 year plan.

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How has China responded to trade deficits, tariffs,

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and industrial policy constraints imposed

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by global competitors in the past?

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And what retaliatory measures might emerge this time around?

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In the past, China has been adopting actually similar

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measures as the US and Europe when it comes to tariffs.

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So when the US levie tariff on Chinese exports,

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China had done tit for tat say,

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increasing the tariff on the US exports to China,

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mostly on food, like soybean, and pork.

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Uh, pork in particular.

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Actually, there was a straight ban after a while,

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and there was also a effort,

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to shift towards the domestic producers,

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which we call the import substitution.

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So this has been done mostly

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through the government procurement program,

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which requires about half,

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or in some cases more than 75%

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of the suppliers coming from domestic sources.

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So this has been, quite successful in a way,

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but also, cultivated a lot of hostility,

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from the developed the world, especially from the us.

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And this time around, though, I think the situation

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has changed, the domestic demand, is pretty weak.

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So when China think about retaliating the US sanction,

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it had been quite careful in the past four years,

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all those retaliated measures, including some,

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the ban on the rare earth onto the US

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or sanctions, targeting,

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specific individuals in the US

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or even EU, having more, really, constrained

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and symbolic rather than substantial for a good reason.

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Um, for China's biggest producers,

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the global, the ones

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that are globally competitive like BYD or, cattle

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or Huawei, they actually need a market.

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They can do very massive scale productions,

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but a lot of the, a lot of the producers

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that I have visited in the past few years,

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they are more towards the middle

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and the smaller producer end,

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and they're less worried actually, about the tariffs.

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Um, even if Trump levied 60% of tariffs, they're not subject

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to it because they their export

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or under this $800 de minimis rule.

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So as long as this rule is there, by the way,

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this rule is about, is,

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is actually applying to any seller, per person, per day.

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Um, if they,

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if their Paso is under $800,

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then it's exempt from any tariffs.

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So the value of Chinese export

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to the US last year under this 800 de minis rule was about

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one third of the total value of Chinese export.

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So as long as this, this rule still stands,

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then the 60% of Trump's tariff won't do much harm

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for Chinese small producers, of course,

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for the large producers, a lot

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of them will be hit pretty hard,

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but they can enjoy the cheaper financing from Chinese banks,

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so they can last a lot longer.

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But if this de minimum rule is somehow abolished

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by the Congress,

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then we will have a pretty big problem in export sector,

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especially when it comes to employment.

231
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Building upon that, and coming back to you, professor Yao,

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as the world's second largest economy,

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China's policy significantly impact global trade

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and industrial strategy.

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Navigating relationship with the US EU

236
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and other global players will shape its economic future.

237
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Will China's evolving strategies foster greater

238
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self-reliance, or will global pushback

239
00:12:41.795 --> 00:12:44.115
and geopolitical tensions reshape its economic

240
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and trade policies?

241
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I don't think, China has, served alliance policy,

242
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for industry.

243
00:12:51.655 --> 00:12:55.715
Uh, if you have seen that, probably that's the result of

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American sanction, right?

245
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Um, so think about it.

246
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Before Trump, began the first round, trade war,

247
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China greatly, relying on

248
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imported the chips, okay?

249
00:13:11.055 --> 00:13:15.515
So China's serve, reliance, REIT was declined.

250
00:13:15.775 --> 00:13:19.515
Uh, but after that, China had to increase,

251
00:13:20.055 --> 00:13:22.195
its own production of the semiconductors.

252
00:13:22.375 --> 00:13:24.955
So over the years, we see its kind

253
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of serve reliance rate increasing, in China, okay?

254
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So, made in China, 2025,

255
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was not a plan to make, China just,

256
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rely on itself for innovation.

257
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It just, to,

258
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develop a strong manufacturing sector in China, right?

259
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So that I, I don't think the Chinese policy makers had,

260
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it's kind of a, self reliance, competing

261
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with the us, in their mind when they,

262
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design that policy.

263
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But over the years, yes, Chinese policy has been

264
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moving toward more and more service reliance, okay?

265
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But I think that the Chinese government has realized

266
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that there is a problem, sustainability,

267
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in this policy.

268
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Think about the eu, tariff on Chinese eus.

269
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Okay? Uh, so China didn't retaliate,

270
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like before, in state, China began this,

271
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talk right in depth, talk with eus use.

272
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Uh, I, I think that with,

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other developing countries like, like Dan just,

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said, we are also worry about,

275
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China's exports, right?

276
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So that's why, you know, inside China,

277
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the moon has been changed.

278
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Instead of encouraging exporting,

279
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now the Chinese government is encouraging people, companies,

280
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investing outside China.

281
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So that's a good sign.

282
00:15:09.385 --> 00:15:13.765
Uh, I think, that, that's going

283
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to be a beginning of a great period,

284
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for Chinese overseas investments.

285
00:15:20.505 --> 00:15:22.805
And that's going to benefit, the whole world

286
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because, now we have to admit

287
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in many areas, Chinese technologies,

288
00:15:32.185 --> 00:15:36.205
better but cheaper than western technologies,

289
00:15:36.205 --> 00:15:40.045
particularly in iwi, in solar panel wind powers, right?

290
00:15:40.665 --> 00:15:43.525
So those are big con big industries,

291
00:15:44.025 --> 00:15:48.245
and also good, for combating climate, change, right?

292
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So if China can increase as investment in Europe,

293
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including UK

294
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and, not America, Southeast Asia, China is going

295
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to create a win-win, situation for whole world.

296
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I fully agree with what Professor Y has said,

297
00:16:09.065 --> 00:16:12.045
and what worries me, in a way is

298
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that China's biggest strength in supply chain actually is

299
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becoming its biggest, biggest vulnerability.

300
00:16:18.305 --> 00:16:21.125
Um, and China's government has been sticking

301
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to this industrial policy for a very long time.

302
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And among many of the factory I have visited, many

303
00:16:30.285 --> 00:16:32.485
of the companies I have talked to in the past three years,

304
00:16:33.235 --> 00:16:36.125
they have big bets in the European market.

305
00:16:36.825 --> 00:16:39.925
So they normally don't have a American strategy

306
00:16:39.925 --> 00:16:43.165
or the US strategy, because it's very hard to get into.

307
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But for Europe so far has been relatively friendly.

308
00:16:47.585 --> 00:16:51.845
Um, if somehow Europe, shuts its door, it doesn't have

309
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to be completely, but somewhat more sanctions,

310
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more tariffs targeting Chinese export

311
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or Chinese investment, then the government has

312
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to do more of the diplomatic work, to work with the eu.

313
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Um, it's going to determine

314
00:17:09.245 --> 00:17:12.005
actually the industrial landscape for Chinese

315
00:17:12.885 --> 00:17:14.885
economic structure in the next decades.

316
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Um, and the domestic consumers will have

317
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to suffer a bit longer in this transition.

318
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And, also a lot of work has to be done

319
00:17:27.105 --> 00:17:28.645
to maintain the social stability

320
00:17:29.025 --> 00:17:30.725
and contain all those financial risks.

321
00:17:31.065 --> 00:17:33.565
So it's a quite a daunting task for the Chinese government.

322
00:17:33.875 --> 00:17:37.565
Yeah, we have to be prepared, for, Trump,

323
00:17:37.625 --> 00:17:38.725
2.0, right?

324
00:17:39.345 --> 00:17:43.005
Uh, but, we can also see some lights,

325
00:17:43.185 --> 00:17:44.245
in the tunnel, right?

326
00:17:44.385 --> 00:17:46.085
Uh, Trump has been saying

327
00:17:46.085 --> 00:17:48.565
that he actually work comes change in Western,

328
00:17:48.835 --> 00:17:52.125
into United States as long as the Chinese companies

329
00:17:52.935 --> 00:17:56.445
don't bring Chinese workers to United States, okay?

330
00:17:57.345 --> 00:18:01.085
Uh, so that, that, that's the hope. Uh, to me.

331
00:18:01.445 --> 00:18:03.485
I, I think there is a chance,

332
00:18:03.485 --> 00:18:07.725
for the Trump administration to open up the American market,

333
00:18:07.945 --> 00:18:09.205
for Chinese investment.

334
00:18:10.205 --> 00:18:12.285
Actually over the last, one

335
00:18:12.285 --> 00:18:16.085
or two years, there is kind of a quiet trend

336
00:18:16.545 --> 00:18:19.605
for Chinese companies, to go back to United States

337
00:18:19.785 --> 00:18:21.245
to invest, right?

338
00:18:21.275 --> 00:18:26.245
Including, the, the battery industry, right?

339
00:18:27.105 --> 00:18:31.325
So, and also I, I see some American companies,

340
00:18:31.945 --> 00:18:36.485
coming back to China to invest, in some facilities,

341
00:18:36.485 --> 00:18:39.365
for example, preparing for,

342
00:18:39.465 --> 00:18:43.125
and g imports from United States, right?

343
00:18:43.705 --> 00:18:47.605
So, you know, there are some positive signs over there.

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00:18:47.785 --> 00:18:49.725
Uh, I bet some help on that.

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00:18:50.415 --> 00:18:53.745
That wraps up this episode of The Exchange. I'm Samiya.

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00:18:54.095 --> 00:18:56.585
Join us next week for more discussions on the research

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00:18:56.585 --> 00:18:58.265
and policies shaping our world today.

Analyzing China's Economic Future: Challenges and Strategies

00:00:14 - This week, we dive into the future of the Chinese economy, exploring how it is balancing debt, managing sustainable growth, navigating trade tensions, and reshaping its global economic role. Joining me today are two prominent voices in this field. Dan Wang was formerly the Chief Economist at Hansen Bank China. Based in Shanghai, Dan holds a PhD in economics from the University of Washington. Yang is a professor at the China Center for Economic Research and the National School of Development Pecking University.

00:00:49 - China's economy faces the daunting task of balancing its debt levels, real estate sector risks, and aging population while pursuing stability. These interconnected challenges require carefully crafted policies to ensure sustainable growth. How has China's debt evolved from the global financial crisis through 2016, and how do these levels compare to its GDP growth? Well, since, the financial crisis, in

00:01:19 - through tremendous structural changes, and in general, the economy is, healthy to me, the fundamentals are some, but, of course, there have been problems, accumulated, over the years. so over the last, six to eight years, the government has been, concentrated, on

Challenges in China's Economic Growth and Structural Reforms

00:01:51 - for example, over leveraging of the economy, right? And also two big, the real is that the sector and many others, right? So, we see some slow down over the last several years. But, to me, that with the result of, the government structural adjustments, so it's already in the government's calculation, right? aging is a long-term challenge.

00:02:23 - to the Chinese economy. China's economy is aiming for 5% growth target, but questions arise about its sustainability over the next decade. Balancing growth with structural reform is critical, but it may require shifting away from subsidized demand. Is debt finance growth still viable? Or does China need to reconsider its economy model? Is it the Chinese government that has been, realizing those, for quite a long time?

00:02:55 - the government has been trying to, restructure the economy, right? particularly the real is that the sector and also our leveraging, the local government, right? I, so to me, those adjustments, approaching, they're ending. So if you read, government documents over the last one month

Shifting Focus: China's Strategy for Domestic Demand and Economic Growth

00:03:29 - the tone has been changed, right? so, I think that this year, the government is going to probably tentatively leave structural adjustments aside and then concentrate on boosting domestic demand, in order to achieve, the target, around 5% growth rate. Can I push you a bit here, professor?

00:03:57 - with high growth in China like it does? Say, for instance, in the us I, I wouldn't always associate high government spending with, high growth, right? The United States, is, really a spatial case because, United States enjoys, the advantages brought by dollar, right? We have to keep that in mind, okay? Pe, you know, people all over the world allow American dollars.

00:04:27 - But, that's the reality we have to take, right? So for other countries, I don't think, you're going to grow your economy by just printing money. But things are different in China, in current, e eCommerce situation in China is that, we don't have sufficient demand. we have too much just supply, okay? So in China, if the government spend more

Addressing China's Economic Imbalance: The Need for Domestic Demand

00:05:01 - Okay? So, so we are in this great imbalances, right? the demand cannot catch up with, supply, and we cannot just rely on export to grow China's economy. That's not the sustainable, last year, China's, surplus, in good trade was almost 1 trillion US dollars, 1 trillion US dollars.

00:05:32 - I mean, everyone in China is aware of that, right? So we have to boost the domestic demand. But, when Chinese people don't want to consume, and Chinese company don't want to invest, so what can we do? We have to ask the government to spend. So that's why, at least for the current China and more government spending is going to bring higher growth rates.

00:06:03 - Well, industrial profits in some sectors like manufacturing have declined others, such as EVs and semiconductors. Show promise. Infrastructure spending has been a cornerstone of China's growth, but its effectiveness varies by sector. Which sectors have benefited most from China's industrial and infrastructure investments? And how do policies proposed at the December work conference aim to address these challenges? China's industrial policy and infrastructure spending has been amazingly consistent in

China's Economic Strategy and Priorities

00:06:36 - for the Chinese government is actually to fend off the threat from the us. And as a result, a lot of the resources have been reallocated to the manufacturing, the high-tech, the green technology. So all those industries have benefited greatly. And if we look at what has been said in the December Central economic war conference, the tone has been the same. And we need to keep in mind that this conference happens every December. So it's mostly to address the short-term economic

00:07:06 - So the tone of this conference has to be aligned with China's long-term strategy, which is to be a stronger and richer country by 2035. And for the domestic economy, a lot of people have been crying for a higher cash transfer, for example, for, average Chinese families or more a boost for services effect, services, sector or consumption. But from the government perspective, this might be a priority maybe for some provinces,

00:07:41 - But for the whole country, the priority list still would have manufacturing in the front. The, and for domestic companies, if they are in a sector like construction or engineering, they have benefited greatly, from the domestic spending and also overseas investment under the umbrella of Belt and Road Initiative, for companies in solar EVs battery production. They also have been benefited greatly from this policy

Shifts in China's Economic Landscape: State Dominance and Trade Responses

00:08:12 - And those companies are also mostly in the private sector. but when we look at who's benefiting, in the upstream, and that's mostly like mining mineral, the natural resources, and these are mostly the SOEs, the state-owned enterprises. So the economic structure now is actually more skewed towards favoring the state sector and bigger companies, rather than smaller ones, Trade tensions and shifting global dynamics are shaping

00:08:44 - But I want us to think back to Trump 1.0 2015 and the made in China 10 year plan. How has China responded to trade deficits, tariffs, and industrial policy constraints imposed by global competitors in the past? And what retaliatory measures might emerge this time around? In the past, China has been adopting actually similar measures as the US and Europe when it comes to tariffs. So when the US levie tariff on Chinese exports,

00:09:16 - increasing the tariff on the US exports to China, mostly on food, like soybean, and pork. pork in particular. Actually, there was a straight ban after a while, and there was also a effort, to shift towards the domestic producers, which we call the import substitution. So this has been done mostly through the government procurement program,

China's Domestic Supply and Trade Retaliation Challenges

00:09:46 - or in some cases more than 75% of the suppliers coming from domestic sources. So this has been, quite successful in a way, but also, cultivated a lot of hostility, from the developed the world, especially from the us. And this time around, though, I think the situation has changed, the domestic demand, is pretty weak. So when China think about retaliating the US sanction,

00:10:20 - all those retaliated measures, including some, the ban on the rare earth onto the US or sanctions, targeting, specific individuals in the US or even EU, having more, really, constrained and symbolic rather than substantial for a good reason. for China's biggest producers, the global, the ones that are globally competitive like BYD or, cattle

00:10:53 - They can do very massive scale productions, but a lot of the, a lot of the producers that I have visited in the past few years, they are more towards the middle and the smaller producer end, and they're less worried actually, about the tariffs. even if Trump levied 60% of tariffs, they're not subject to it because they their export or under this $800 de minimis rule.

Impact of Tariff Rules on Chinese Exports and Trade Relations

00:11:24 - this rule is about, is, is actually applying to any seller, per person, per day. if they, if their Paso is under $800, then it's exempt from any tariffs. So the value of Chinese export to the US last year under this 800 de minis rule was about one third of the total value of Chinese export.

00:11:55 - then the 60% of Trump's tariff won't do much harm for Chinese small producers, of course, for the large producers, a lot of them will be hit pretty hard, but they can enjoy the cheaper financing from Chinese banks, so they can last a lot longer. But if this de minimum rule is somehow abolished by the Congress, then we will have a pretty big problem in export sector, especially when it comes to employment. Building upon that, and coming back to you, professor Yao,

00:12:26 - China's policy significantly impact global trade and industrial strategy. Navigating relationship with the US EU and other global players will shape its economic future. Will China's evolving strategies foster greater self-reliance, or will global pushback and geopolitical tensions reshape its economic and trade policies? I don't think, China has, served alliance policy, for industry. if you have seen that, probably that's the result of

China's Shift Toward Semiconductor Self-Reliance

00:12:57 - so think about it. Before Trump, began the first round, trade war, China greatly, relying on imported the chips, okay? So China's serve, reliance, REIT was declined. but after that, China had to increase, its own production of the semiconductors. So over the years, we see its kind of serve reliance rate increasing, in China, okay?

00:13:34 - was not a plan to make, China just, rely on itself for innovation. It just, to, develop a strong manufacturing sector in China, right? So that I, I don't think the Chinese policy makers had, it's kind of a, self reliance, competing with the us, in their mind when they,

00:14:04 - But over the years, yes, Chinese policy has been moving toward more and more service reliance, okay? But I think that the Chinese government has realized that there is a problem, sustainability, in this policy. Think about the eu, tariff on Chinese eus. Okay? so China didn't retaliate,

China's Shift: Emphasizing Overseas Investment for Global Benefit

00:14:36 - talk right in depth, talk with eus use. I, I think that with, other developing countries like, like Dan just, said, we are also worry about, China's exports, right? So that's why, you know, inside China, the moon has been changed. Instead of encouraging exporting, now the Chinese government is encouraging people, companies,

00:15:07 - So that's a good sign. I think, that, that's going to be a beginning of a great period, for Chinese overseas investments. And that's going to benefit, the whole world because, now we have to admit in many areas, Chinese technologies, better but cheaper than western technologies,

00:15:40 - So those are big con big industries, and also good, for combating climate, change, right? So if China can increase as investment in Europe, including UK and, not America, Southeast Asia, China is going to create a win-win, situation for whole world. I fully agree with what Professor Y has said,

China's Supply Chain: Strengths and Vulnerabilities

00:16:12 - that China's biggest strength in supply chain actually is becoming its biggest, biggest vulnerability. and China's government has been sticking to this industrial policy for a very long time. And among many of the factory I have visited, many of the companies I have talked to in the past three years, they have big bets in the European market. So they normally don't have a American strategy

00:16:43 - But for Europe so far has been relatively friendly. if somehow Europe, shuts its door, it doesn't have to be completely, but somewhat more sanctions, more tariffs targeting Chinese export or Chinese investment, then the government has to do more of the diplomatic work, to work with the eu. it's going to determine actually the industrial landscape for Chinese

00:17:15 - and the domestic consumers will have to suffer a bit longer in this transition. And, also a lot of work has to be done to maintain the social stability and contain all those financial risks. So it's a quite a daunting task for the Chinese government. Yeah, we have to be prepared, for, Trump, 2.0, right? but, we can also see some lights,

Opening Markets: A Shift in US-China Investment Dynamics

00:17:44 - Trump has been saying that he actually work comes change in Western, into United States as long as the Chinese companies don't bring Chinese workers to United States, okay? so that, that, that's the hope. to me. I, I think there is a chance, for the Trump administration to open up the American market, for Chinese investment. Actually over the last, one or two years, there is kind of a quiet trend

00:18:19 - to invest, right? Including, the, the battery industry, right? So, and also I, I see some American companies, coming back to China to invest, in some facilities, for example, preparing for, and g imports from United States, right? So, you know, there are some positive signs over there.

00:18:56 - That wraps up this episode of The Exchange. I'm Samiya. Join us next week for more discussions on the research and policies shaping our world today.

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