Like two strategic wizards, Xi Jinping and Trump they study each other. And on the one hand they show off friendship and expertise. On the other side of the Pacific Ocean, China and the United States are preparing the countermeasures, from the “you never know” series.
Il Chinese President Xi Jinping yes it is right away congratulated with Donald Trump for his victory in the presidential elections in the United States, speaking of the beginning of a “new era in relationships China-USA“, according to the Chinese news agency Xinhua, hoping for "a stable, healthy and sustainable relationship in line with the common interests of both countries and the expectations of the international community". Xi also showed off all the Chinese wisdom by specifying that "history shows us that China and the United States can benefit from cooperation and lose from confrontation" and adding that both nations will have to find "the right way to get along", since the imminent US tariffs risk taking them back to the times of the trade war of years ago. Moreover, the spokeswoman for the Ministry of Foreign Affairs, Mao Ning, warned, "there would be no winner in a Beijing-Washington trade war and it would not be good for the whole world". So far so good. But the facts, even now that Donald Trump has not yet assumed office, are making themselves felt.
Tariffs, but also obstacles to the inflow of US capital into China
Trump inherits the relations between the United States and China restored by Presidents Joe Biden and Xi Jinping over the past year, in an attempt to revive diplomatic relations from the lowest point reached after Covid-19 and tensions over Taiwan. As is well known, Trump promised 60% duties on all goods Made in China towards the US. But, according to analysts, there are also concerns about the measures it could take to hinder the US capital inflows into China , collaboration between American financial companies and some Chinese companies.
Joe Jelinek, research director at Singapore-based consultancy Kapronasia, said Trump would likely adopt a harder position towards China, increasing regulatory risks for U.S. financial firms operating there. He said that new or increased rates and capital restrictions could discourage Wall Street firms from expanding into China, as they would face stricter controls and potential compliance issues. It is likely that American companies themselves will reconsider their strategies in China to mitigate these risks,” Jelinek said, adding that this could lead to a withdrawal or delay in investments.
Some Wall Street companies they already have reduced their presence in China, both because of the economic slowdown and because the more stringent regulatory controls on corporate transactions and fundraising in the last two years have reduced the market's revenue potential. top five US investment banks – Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America and Citigroup – earned $454 million in Chinese investment banking revenue in 2024, according to Dealogic data. Even more than 10 US law firms have closed all or some of their China offices since last year, according to media reports and public announcements. Law firm Mayer Brown said it would spin off its Hong Kong operations this year, while Dentons last year split from its mainland China teams.
China's Countermeasures: Fiscal Incentives and Export Enhancement
Meanwhile China does not stand by. Certainly, even before the elections, regardless of the winner, the authorities in Beijing had understood that the business situation would have changed. This in a difficult economic picture with a GDP that risks not meeting the government's target of 5% for 2024. This is why in recent weeks the Chinese authorities have been busy announcing various types of stimulus packages. The announcement has already increased the confidence of consumers and companies, even if the details and the implementation of the projects are still missing.
Tomorrow a very long one will end top (started last Monday) of Standing Committee of the National People's Congress, China's top legislative body, from which some analysts expect to inject fiscal packages of at least 2.000 billion yuan ($280 billion), to supplement the monetary stimulus package presented at the end of September. "We expect the rough figures for the four main components indicated by the Ministry of Finance to be announced in mid-October" namely the local government debt restructuring, the stabilization of the Real Estate Market,'bank capital injection and support for internal question”, reads the report of Bloomberg Intelligence signed by economists Chang Shu, David Qu and Eric Zhu.
But on top of that China is counterattacking by imposing duties on the agri-food sector, thanks to the solid trade relations with Brazil, penalizing American companies with strong Chinese interests and introducing export limits on crucial raw materials. It already happened last year with gallium and germanium, two metals used in the defense, communications and semiconductor sectors.
This morning's news is of the acceleration of Chinese exports, with companies moving ahead by dumping stocks in key export markets in anticipation of further tariffs from the United States and the European Union. There is nervousness about Trump's tariff threat among Chinese businessmen and officials, with about $500 billion of annual shipments at stake, as trade tensions have escalated with the EU, which received $466 billion of Chinese goods last year. China's exports grew at their fastest pace in two years in October, according to customs data released today, rising 12,7% year-on-year last month, beating a 5,2% increase forecast in a survey Reuters among economists and a 2,4% increase in September. Imports fell 2,3%, compared with expectations for a 1,5% decline, turning negative for the first time in four months.
Chinese exports in particular towards Russia rose 24,4% in October from a year earlier, the fastest pace since November last year, Chinese customs data showed Thursday, as Beijing confirmed strong ties with Moscow. The increase was higher than the 15,7% increase in September. However, China's imports from Russia fell 4,3% last month from a year earlier, down from a 9,2% decline in September, as payment problems disrupted trade transactions.
