The Future of China's Economy

[Sijoittaja-alokas]

China warns it will retaliate against countries that, at the urging of the United States, restrict their trade ties in a way that harms Beijing’s interests.

China condemns agreements made at China’s expense and promises countermeasures. Furthermore, the country considers the United States’ tariff policy unilateral, as we know Trump uses tariff negotiations to pressure his allies, which has already led China to respond with 125 percent tariffs and place American companies on a blacklist.

"Key Points

• China has warned it will retaliate against countries that cooperate with the U.S. in ways that compromise Beijing’s interests, according to a statement from the Chinese Ministry of Commerce.
• The threat comes as U.S. President Donald Trump’s administration is reportedly planning to use tariff negotiations to pressure U.S. partners to limit their dealings with China.
• “China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will not accept it and will resolutely take reciprocal countermeasures,” the Chinese Ministry of Commerce said, according to a CNBC translation."

https://www.cnbc.com/2025/04/21/china-to-retaliate-against-nations-that-work-with-us-to-isolate-beijing.html

[Verneri_Pulkkinen]

An interesting story about the patriotism of Chinese private investors. Buying stocks is one way to support the country in the trade war.

The dip has been bought there, it’s visible in the statistics too. It’s another matter, however, how many genuinely have such a motive to keep the domestic stock market afloat. In China, stock market investing is notoriously more akin to casino-like activity in spirit.

'For our country': China's patriots are buying the dip

[Sijoittaja-alokas]

The number of Chinese cargo ships heading to the ports of Los Angeles and Long Beach has decreased considerably due to the cold trade war and new tariffs.

Last week, there were 29 percent fewer vessels than the previous week and 44 percent fewer than a year ago. The number of containers also decreased, and shipping companies are canceling routes due to a general drop in orders. Land transport collapsed when 700,000 truckloads of goods disappeared, etc.

https://www.cnbc.com/2025/04/22/busiest-us-ports-see-big-drop-in-chinese-freight-vessel-traffic.html

[Verneri_Pulkkinen]

Chinese firms have increased their own share buybacks. Interesting.

https://finance.yahoo.com/news/chinese-firms-rush-announce-buybacks-054349754.html

[Sijoittaja-alokas]

Bloomberg’s news reports how China denies active negotiations with the United States over tariffs, saying claims of progress are unfounded, as has been noted elsewhere. China emphasizes that negotiations require mutual respect and equality.

The Trump administration sends conflicting signals, and China demands the removal of all tariffs. China has responded to U.S. tariff measures with its own tariffs and economic countermeasures. China doesn’t seem to be the one to give up first.

China denies any suggestion it is currently in talks with the U.S. over tariffs

---

The article below reports how South Korea’s data protection authority has stated that Chinese AI company DeepSeek collected personal data from local users and transferred it abroad without consent.

According to the authority, DeepSeek transferred user data to companies in China and the United States without informing users. The authority has issued corrective recommendations to DeepSeek, including the destruction of data transferred abroad and the creation of legal transfer protocols.

https://www.cnbc.com/2025/04/24/south-korea-says-deepseek-transferred-user-data-to-china-us-without-consent.html

[Sijoittaja-alokas]

The article below explains how emerging markets have found themselves in a difficult position due to the escalating trade war, having to choose between China and the United States.

However, many countries have chosen to support themselves; for example, Southeast Asian countries are striving to increase regional trade, and although the region is susceptible to the effects of the trade war, it also sees opportunities in this situation.

https://www.cnbc.com/2025/04/25/emerging-markets-are-betting-on-the-post-tariffs-winner.html

[Sijoittaja-alokas]

China plans to support struggling businesses with targeted measures to respond to growing external shocks, such as the escalating trade war with the United States.

A meeting chaired by Xi Jinping also outlined a “timely reduction” of interest rates and banks’ reserve requirement, and while the general policy remains unchanged, flexibility in targeted support measures is emphasized to mitigate the effects of the trade war.

"Key Points

• China plans to help struggling businesses with targeted measures in the face of “increased external shocks,” according to a readout of a meeting chaired Friday by Chinese President Xi Jinping.
• The Politburo meeting readout also called for “timely reduction” of interest rates and the reserve requirement ratio — the amount of cash banks need to have on hand.
• Policymakers are sticking with their stance from earlier this year, while indicating flexibility for targeted measures, said Zong Liang, chief researcher at Bank of China."

https://www.cnbc.com/2025/04/25/china-pledges-to-ramp-up-targeted-support-for-businesses-as-us-trade-war-hits.html

[Sijoittaja-alokas]

Kiinan teollisuusyritysten voitot kasvoivat vuoden ensimmäisellä neljänneksellä 0,8 prosenttia edellisvuodesta 1,5 biljoonaan juaniin. Kasvua tukivat muun muassa kulutustavaroiden vaihtokampanja, mutta Yhdysvaltojen tullit voivat painaa voittoja tulevaisuudessa.

Hallitus aikoo tukea sekä yrityksiä että työntekijöitä, lisäksi se yrittää myös edistää kotimaan kysyntää ja innovaatioita. Valtion omistamien yritysten voitot laskivat, kun taas vastaavasti ulkomaisten yritysten voitot kasvoivat.

"Key Points

• China’s industrial profits returned to growth in the first quarter, official data showed on Sunday, but are likely to come under further pressure amid a trade war with the United States.
• Cumulative profits of China’s industrial firms rose 0.8% to 1.5 trillion yuan ($205.86 billion) in the first quarter from a year earlier, the National Bureau of Statistics (NBS) data showed, reversing a 0.3% decline in the first two months."

China's first-quarter industrial profits return to growth amid tariff woes

[Sijoittaja-alokas]

The article below describes how the tightening of US tariffs has caused many Chinese factories to halt production, and additionally, companies have started looking for new markets. This has led to layoffs and the experimentation with new sales methods, such as livestreaming sales, domestically.

According to the article, small and medium-sized enterprises are particularly hard hit, with some relocating their production to other parts of Asia or directing their sales to Latin America and Europe. Simultaneously, new programs, etc., have been established to support domestic market sales.

https://www.cnbc.com/2025/04/28/chinese-factories-stop-production-eye-new-markets-as-us-tariffs-hit.html

[Sijoittaja-alokas]

Here are a couple of tweets about China and US container freight shipments.

https://x.com/wallstengine/status/1916762572579279300

Let’s also include this one, as it was a continuation of these.

[Sijoittaja-alokas]

China today unveiled new employment support measures and hinted at other support measures in response to escalating trade tensions with the United States.

The government will support export companies and subsidize the hiring of graduates. Youth unemployment is high, and the central bank is already expected to cut interest rates. The economic growth target is around 5 percent, and new stimulus measures are promised as needed.

" Key Points

• Senior Chinese officials on Monday outlined plans to support jobs and help exporters, while hinting at the possibility of more stimulus in light of rising trade tensions with the U.S.
• The briefing came after the human resources ministry on Friday announced subsidies for companies that hire recent graduates, but did not specify an amount.
• Authorities will provide financial support to exporters so they “will have more confidence to take orders,” Sheng Qiuping, vice minister of commerce, told reporters in Mandarin, translated by CNBC."

https://www.cnbc.com/2025/04/28/china-rolls-out-employment-support-plans-stimulus-given-us-tensions.html

[Sijoittaja-alokas]

China’s factory activity contracted in April at its fastest pace in over a year, as new Trump tariffs hit exports and cut short an earlier “recovery.”

The official Purchasing Managers’ Index (PMI) fell significantly weaker than forecasts, and weakening foreign demand increases pressure for further stimulus again. Even though authorities emphasize the economy’s resilience, the outlook remains challenging.

• "Official manufacturing PMI falls faster than expected
• Non-manufacturing activity growth slows
• Trump tariffs call time on producers front-loading shipments"

https://www.reuters.com/markets/asia/chinas-factory-activity-falls-faster-than-expected-april-2025-04-30/

[Sijoittaja-alokas]

At the Canton Fair, a Chinese entrepreneur described how Trump’s 145 percent tariffs have halted almost all of his orders to the United States. The entrepreneur feels that China is being punished for its efficiency and for manufacturing high-quality, affordable products.

According to the story, many Chinese manufacturers are now struggling as exports decline, and even though some Americans believe the tariffs are temporary, uncertainty casts a shadow over businesses in both countries.

“It’s like a war, I think. Under a war, the most suffering is the people, no matter if it’s the U.S. or China,” Qiu sanoi.

Are Trump's tariffs just punishing China for being good at what it does?

---

The tariff battle between the United States and China is intensifying, and opinion writer Liz Peek argues that the U.S. is better prepared to face the situation than China.

Trump believes that China’s export-dependent economy will collapse under the tariffs, while Xi Jinping relies on Americans’ dependence on cheap Chinese products.

“Well, maybe the children will have two dolls instead of 30 dolls” - Trump

Meanwhile, China’s Xi refuses to stand down, certain that U.S. consumers will balk at tariff-induced higher prices or scarcities. GOP pollster Frank Luntz recently interviewed a number of Trump voters, expecting them to rail about the tariffs, only to find they stood with the president, ready to pay a little more for U.S.-made goods and to give him time to see his agenda bear fruit.

https://thehill.com/opinion/finance/5277881-trump-china-tariffs/

[Verneri_Pulkkinen]

Cash flows of listed companies are generated in the real economy. The size and growth rate of the economy matter when assessing market attractiveness. In China, an increasing number of data publications have been discontinued. In practice, the world’s second largest economic area is increasingly driving without lights in the dark.

Good article in the WSJ https://www.wsj.com/world/china/china-economy-data-missing-096cac9a?mod=hp_lead_pos7

[Sijoittaja-alokas]

Marianne’s macro comments from this morning fit well into this thread.

Pekingin mysteereitä talousluvuissa - Inderes

[Sijoittaja-alokas]

U.S. Treasury Secretary Scott Bessent and trade policy director Jamieson Greer will meet their Chinese counterparts in Switzerland this week. According to the story below, the meeting marks a significant step towards initiating new negotiations.

The discussions take place amidst an ongoing trade war, and aim to alleviate the tense economic climate between the countries.

"Key Points

• President Donald Trump’s Treasury Secretary, Scott Bessent, and top trade official Jamieson Greer will meet with their Chinese counterparts in Switzerland this week.
• The announcements signal a major step toward Washington and Beijing beginning negotiations amid an ongoing trade war."

https://www.cnbc.com/2025/05/06/trump-trade-china-switzerland-tariffs.html

[Sijoittaja-alokas]

China’s latest stimulus measure, which includes interest rate cuts and increased liquidity, failed to convince the markets. Markets reacted sluggishly, as investors await more concrete measures to boost consumer demand and support the real estate sector, even though the economy grew more than expected in the beginning of the year, the tightening trade war with the United States has increased uncertainty.

The effects of tariffs are visible in slowing exports and weakening employment, especially in labor-intensive sectors.

Several banks have already lowered China’s growth forecasts for 2025. Upcoming trade negotiations with the United States are crucial, but expectations for rapid progress are low.

https://www.cnbc.com/2025/05/08/china-latest-stimulus-measures-us-trade-talks.html

[Verneri_Pulkkinen]

Pushing a rope is difficult! China’s stimulus is generally what’s called “supply side” stimulus, meaning interest rates are lowered and loans are eased so that even more can be produced more cheaply.

The problem is that the Chinese themselves don’t want to consume. The country is plagued by the deflating of the largest real estate bubble in history and a lack of confidence. Exports, i.e., demand from the rest of the world (mainly the United States), have pulled through so far, but the trade war is throwing a wrench in the works.

In fact, consumers seem to be having increasing problems repaying their loans, Pettis commented a moment ago. He predicts that we will soon hear about new stimulus measures that would more directly address that demand problem.

2/6
“China’s personal lending market,” Caixin writes, “is under mounting pressure. What began as a slow-burning concern in early 2024 has become an acute worry in 2025. Housing mortgages, consumer loans, credit card…3/6
debt and, most critically, small business loans — collectively known as personal loans — are slipping into delinquency at rates not seen since the 2008 financial crisis. Banks across the country are scrambling.”

5/6
It also notes that “Much of the stress is concentrated in China’s smaller cities, where declining populations and excessive housing supply are driving down property prices. Even in wealthier urban areas such as Hangzhou, delinquencies are creeping upward.”
6/6
If this continues, I expect it to put much more pressure on Beijing to come up with direct fiscal “solutions” to China’s problem of low consumption. I suppose we will see new proposals this summer.

https://x.com/michaelxpettis/status/1920717840857858104

What could a more direct demand stimulus be? I would speculate that perhaps more generous pensions, social security, or similar. Perhaps even so-called “helicopter money” for consumers will be seen someday?

This is important to follow, because if China does not correct its own demand deficit, it will reflect elsewhere as export pressure and fuel this trade war conflict.

[Sijoittaja-alokas]

China’s central bank continued hoarding gold in April, increasing its reserves by approximately 70,000 ounces.

Gold has been purchased for six consecutive months, and since 2022, the amount has grown by approximately 11 million ounces. According to the article below, gold currently accounts for a record 8 percent of China’s foreign exchange reserves.

https://x.com/KobeissiLetter/status/1920908475263316352

[Sijoittaja-alokas]

This is quite an interesting comparison between China and the United States, with the theme of trade matters in China.

https://x.com/StockMKTNewz/status/1921555978178249081