China’s manufacturing sector, which powers 30% of global output, stands as a titan in the world economy. Yet, its consumption is far less than what it produced, making up just 13% of the global total. This imbalance has come under scrutiny as U.S. trade pressures mount, 'bullying' China to bow to its economic hegemony. Far from buckling, Beijing has responded with a blend of bold financial moves and strategic foresight, positioning itself to weather the storm and potentially emerge stronger. China rolled out a hefty fiscal stimulus package worth up to $270 billion along with a record-breaking RMB 3.28 trillion in bonds during the first quarter of 2025. These measures aren’t just stopgaps but are designed to fuel growth and keep the economy growing, irrespective of external threats. By injecting liquidity and stabilising key sectors, China is doubling down on its ability to endure prolonged trade jabs.
China’s centralised decision-making system gives it a unique edge. Unlike the politically divided United States, where policy can stall amid partisan gridlock, Beijing can chart a long-term course with agility and cohesion. This structure allows China to absorb short-term economic hits while keeping its eyes on bigger, strategic goals. Adding to its arsenal, China holds $760.8 billion in U.S. Treasury securities, a financial leverage that extends its influence over American markets. This stockpile isn’t just a passive investment; it’s a tool that could unsettle U.S. economic stability if wielded aggressively. Coupled with retaliatory measures like 84% tariffs on U.S. goods, blacklisting American companies, and restricting rare earth exports, materials essential to American tech and defence industries, China is targeting specific pain points in the U.S. economy with precision.
China isn’t putting all its eggs in the American basket. Strategically, it’s deepening trade ties with the European Union and other regions while easing trade barriers elsewhere. This diversification isn’t a knee-jerk reaction but a calculated move to reduce reliance on the U.S. market over time as it moves from traditional manufacturing to high-tech industries. The trade clash between the world’s two largest economies has sent shockwaves through global financial markets. Recent bond sell-offs and currency swings reflect the high stakes and China’s central role in the global system. Yet, even with a punishing 104% duty on its exports to the U.S., China has a trump card: its 1.4 billion-strong domestic market. This vast consumer base acts as a buffer, softening the blow of external trade disruptions in a way the U.S. simply can’t replicate. It’s willing to stomach short-term losses for long-term gains while American consumers face rising prices and panics. The 90-day tariff suspension may have been the deciding factor in China's favour or a pause to have time for discussion and negotiation, something the Trump administration admits they are short on.
Source: Reuters, NYPost, Business Insider
Photos:
