Xi Jinping’s Economic Strategy Faces Headwinds from Trade War

As China prepares for its major political gathering, President Xi Jinping is seeing a rebound in the economy, fueled by advances in AI and support for entrepreneurs like Jack Ma. However, escalating U.S. tariffs threaten to undermine this progress.

Xi Jinping navigates economic challenges with U.S. tariffs and focus on tech growth

Economic Goals and Fiscal Measures

At the National People’s Congress (NPC), China is likely to set a 5% growth target for 2024. To meet this, the government plans to boost its budget deficit and inject trillions of yuan to address deflation and a struggling property market. However, some experts worry these fiscal measures may fall short.

Trade War and Export Challenges

With new U.S. tariffs in place, China’s export growth is expected to slow, making it even more critical to focus on domestic spending. Analysts predict an increase in government debt and bond issuance, but concerns about local debt and ongoing trade tensions with the U.S. remain.

Emphasis on Technology and Domestic Spending

AI breakthroughs, like the DeepSeek chatbot, are expected to drive long-term growth for China. Yet, weak consumer spending and a depressed real estate market continue to pose significant challenges. The government will need to stimulate domestic demand to cushion the economy from external shocks.

Navigating Risks and Opportunities

Despite the challenges posed by the trade war, experts remain cautiously optimistic, believing China’s ability to manage risks and seize opportunities will be crucial to its economic future.