‘It's not us, it's Trump': China accuses US of violating Geneva trade truce, vows firm response - The Economic Times Video
Tensions are mounting once again between the U.S. and China over trade truce. Beijing has strongly rejected US President Donald Trump's accusations that China violated the Geneva trade pact. Instead, China claimed that it's the US that has 'seriously violated' the agreement with new restrictions on chip tech and student visas. The Chinese Commerce Ministry warned that it will take 'resolute' and 'forceful' action if Washington continues down this path.
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Indian Express
28 minutes ago
- Indian Express
Amid tariff war, China appears unfazed, but its economy could be vulnerable; high debt and high deficit loom large
China's economy seems to have ostensibly shaken off the doomsday predictions stemming from the ongoing trade war with the United States, with that country's national statistics bureau presenting a picture of calm in its later GDP data release for April 2025. It showed stable growth with a mild softening in consumption and investment, and overall employment largely remaining stable. Retail sales of consumer goods grew 5.1 per cent year-on-year, just slightly lower than analysts' estimates of 5.5 per cent, while service industry production too increased by 6 per cent, and fixed asset investment rose 4 per cent over the previous year. Officials cited key factors like consumer trading programmes that incentivise purchase of household goods through a discounting scheme, increase in tourist and transportation inflows, as well as the Belt and Road Initiative as 'stabilising forces'. They are upbeat about economic growth projections staying on track, but analysts remain cautious. China's strengths, apart from its large and diversified economy, include its strong GDP growth prospects relative to peers, its pivotal role in global trade and robust external finances. More importantly, Beijing is seeing success in its efforts to build a whole new economic engine as part of its 'Made in China 2025' national strategic plan, which promises to be a source of future resilience, according to analysts. This includes world-beating companies in areas such as new energy, including solar panels and batteries, electric vehicles, semiconductors, biopharmaceuticals and AI. Notable among these are GCL Technology, the world's second leading producer of polysilicon — the key material for solar panels; electric vehicles makers led by global auto heavyweight BYD, Leapmotor and Nio and lithium-ion battery makers including CATL and BYD. The Huawei and Semiconductor Manufacturing International Corp. (SMIC) combine, which have been working together to develop and produce cutting-edge chips, particularly in the light of US sanctions limiting Huawei's access to advanced technology, have been successful, quite like the Chinese space programme that also worked around American sanctions. Even as the prolonged slump in China's property market is dragging down consumer confidence and weighing on an economy already suffering from the effects of low productivity in heavy industry and cheap manufacturing, Beijing is seeing remarkable success in its focus on creating a high-tech, clean, and sustainable replacement to its old economy in the forms of these new age companies, with the aim of becoming the global leaders in each of these technologies. These, in turn, are seen as serving to transform China's image as the world's manufacturer of mass-produced goods and materials. As US President Donald Trump and his cabinet full of China hawks set out to address the trade imbalances, there could some looming concerns for Beijing. While the general impression is that a prolonged phase of higher duties could hurt the US more than China, analysts point to the fact that given the latter's precarious finances and some inherent structural weaknesses, a drawn-out tariff war could hurt Beijing as much as Washington, DC, if not more. If it lingers, China's underlying structural issues that range from high government debt, demographic decline, rising youth unemployment, combined with growing trade tension, could force a stumble, if not a stall. Festering Problems What is undeniable is that China's growth over the last couple of decades has been powered by capital investments, especially in the real estate sector, much of which has been financed by an inefficient banking system. With domestic debt levels high and rising, the property market continues to be under severe stress ever since property major Evergrande went belly up in 2023. The real estate crisis has badly dented consumer sentiment, given that nearly one in four Chinese have some sort of an investment in real estate. The investment in China's property market fell by nearly 10 per cent in the first four months of 2025 compared to the same period last year, according to latest official data, amid the renewed trade tensions with the US. For Chinese consumer sentiment taking a hit, the residential real estate market is one important factor. Then there are structural issues with the Chinese economy as well. While China has leveraged export growth and infrastructure investments to power its economic development over the last four decades, there is now the growing problem of youth unemployment. According to Hong Kong-based Spanish economist Alicia Garcia Herrero, outsiders see less of the unemployment problem than what actually exists there because in the Chinese manufacturing sector, workers are routinely asked to take unpaid leave. So these workers end up working fewer hours, and earning less, while technically being on the rolls. This, according to Herrero, chief economist for Asia-Pacific at French investment bank Natixis and adjunct Professor at Hong Kong University of Science and Technology, is one reason why disposable income is not growing in China. The trigger for that is automation, given that industrial capacity in China is increasingly getting mechanised. 'China's economic power is increasing, but household power, or purchasing power, is not'. Fitch Ratings said in an April report that the step-up in fiscal stimulus announced by China's government for 2025 is likely to support the economic outlook, but the large budget deficit points to a continued rise in government debt in the next few years. Deteriorating public finances were the key factor behind the rating agency's decision to revise the 'outlook on China's 'A+' sovereign rating' to negative in April 2024. Debt/deficit Overhang China's fiscal deficit is budgeted to rise to 8.8 per cent of GDP in 2025, up from 6.5 per cent in 2024 (on a Fitch-adjusted basis) based on government reports at the annual legislative session of the National People's Congress. Experts say this – the combined deficit of the federal government and provinces – could be closer to 10 per cent. This is well above the projected median deficit for 'A' category sovereigns of 2.7 per cent of GDP, Fitch said in its report. The government's official deficit target was raised to 4 per cent of GDP in 2025 from 3 per cent last year. Experts say that China's total-country-debt-to-GDP ratio could be higher than what is put out, if one were to take into account the so-called 'hidden debt' and adjust for 'inflated' GDP claims. Western analysts have consistently maintained that China did not grow anywhere near the reported 5 per cent pace last year and are willing to shave off up to a percentage point from that number. Lower GDP, consequently, worsens the deficit situation statistically. Some of this increase in deficit is now driven by lower revenue, due partly to a structural decline in property-related revenues and tax cuts. Revenue is budgeted to fall to just 21.1 per cent of GDP in 2025, under Fitch's adjusted definition, down from 28.4 per cent in 2019. The government is discussing the introduction of new revenue-enhancing measures, but fiscal consolidation could face challenges if these are not forthcoming. 'China has grown almost entirely through capital investment,and because there isn't enough to invest in, a lot of good money chases bad, and they have reached a limit,' noted Anne Stevenson-Yang founded J Capital Research. That problem only seems to be worsening. 'External pressures will be particularly acute for Mainland China, at a time when the domestic economy is still finding its footing amid ongoing property sector challenges, subdued household confidence and consumption, and deflationary pressures… Fiscal policy will likely be a key tool for trying to stabilise the property market and offsetting external and domestic headwinds, keeping growth at around 4.3 per cent, but driving wider fiscal deficits and higher government debt, Jeremy Zook, Director, Fitch-Hong Kong said in a report titled 'Greater China Sovereigns Outlook 2025'. High fiscal deficits, coupled with subdued nominal GDP growth and the materialization of contingent liabilities, could continue to put upward pressure on China's debt problem. 'We estimate that general government debt (including central and local government debt) rose above 60 per cent of GDP in 2024, up from around 55 per cent in 2023 and exceeding the median for 'A'-category sovereigns of 57 per cent. In 2025, the debt ratio is likely to rise to the high-60s per cent of GDP level, based on budget plans and the ongoing 'debt swap' that will bring around trillion of yuan worth off-balance sheet debt onto local government books,' Fitch said. Expanding consumption remains the top government priority for Beijing in 2025. It is still unclear as to how large the fiscal impulse has to be, or whether it will sustainably lift underlying domestic demand. The government has set an ambitious growth target of around 5 per cent for 2025, and a lot will depend on stking demand, amid headwinds from subdued domestic demand, lingering property-sector stress and rising external challenges. Growth moderation/local govt debt According to the IMF Executive Board, which concluded the 2024 Financial System Stability Assessment (FSSA) with China, said that China's investment-led high growth model has given way to more moderate growth amid an unresolved property sector adjustment and an overhang of local government financing vehicle debt. Financial stability risks are elevated and rising, as compared to the 2017 FSAP, It noted, as asset quality deteriorates and bank profitability declines. While the largest banks are well capitalised and liquid, and appear resilient to shock, mid-sized and smaller banks 'appear more vulnerable'. The property sector downturn and local government financing vehicle debt pose risks, while loss deferral practices reduce transparency and may veil losses, the IMF said. Amid all this is the unfolding US-China trade war. There is a sense in Washington DC that China has gotten away with low cost manufacturing for too long. No other country has had the same level of global dominance across product categories since the early 1970s. This is more significant now than in earlier decades, when trade represented a much lower share of global goods production and consumption. For instance, the global trade-to-GDP ratio in 1970 was around 25 per cent, but by 2022, that climbed to over 60 per cent. Weakening domestic demand, alongside export-facilitating policies in products, where China is the world's dominant manufacturer, has led to prices collapsing globally and driving other national producers out of business. While the benefit of this has been a phase of sustained lower global inflation, China has simultaneously created a progressive stranglehold over global manufacturing: a level of manufacturing dominance by a single country seen only twice before in world history — by the UK at the start of the Industrial Revolution, and by the US just after the second World War, according to research by the Rhodium Group and from views flagged by Noah Smith's 'Manufacturing is a war now' piece. What makes China's extraordinary dominance in manufacturing worse is the continuing weakness in domestic demand in China. That too comes from the problem of China's unwillingness to vacate its earlier specialisation in low value-added manufactured products as it moved up the global value chain. This has concomitantly led to a weakness in Chinese demand for imported goods, which was expected to rise if China had ceded the manufacture of low value-added manufactured goods as it progressively moved up the value chain. So, more than Beijing's export competitiveness, weak Chinese imports explain this continuing imbalance. Anil Sasi is National Business Editor with the Indian Express and writes on business and finance issues. He has worked with The Hindu Business Line and Business Standard and is an alumnus of Delhi University. ... Read More
News18
38 minutes ago
- News18
Can China Weaponise Brahmaputra Waters Against India?
After the Pahalgam terror attack, India paused the Indus Waters Treaty, demanding action from Pakistan on cross-border terror. Now, a top Chinese policy adviser has issued a veiled warning over India's control of the Brahmaputra. Could China trigger a water war? Tune in to News18 Explainers for the full breakdown.
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First Post
40 minutes ago
- First Post
India's long game to end Pakistan's short wars: The postscript of Op Sindoor
The era of running a short war and finishing with a scratch or two is over read more Once the war was over and the fog had cleared, the ruins emerged from behind an ebbing curtain of smoke. The picture revealed was different from the one accompanying the noise during the skirmish. It unravelled the context behind the conflict and explained the dismantling of Rahim Yar Khan, Noor Khan airbases and the megalomania of Pakistani generals. Outside the warzone, the fog of war is known to claim the uninitiated and the fantasists. There is another ready victim: the eternally complexed. An affliction so rooted in wars with India over the years, this inadequacy had refused to leave the imagination of Pakistani generals who remain hopelessly obsessed with their neighbour. And for that reason alone, they embraced short wars that increased their whimsies of dabbling in false claims. This time, the Rawalpindi generals once again hoped to fight a war and claim victory, which they did. But they were not quite prepared for India's military and political response. STORY CONTINUES BELOW THIS AD Provocation and Response Let's begin with Pakistan's historic lack of appetite for sustaining a conflict once begun. In 1965, Ayub Khan and Zulfiqar Bhutto asked the Chinese if a short war was possible with India. When Zhou Enlai told them to be prepared to lose cities in a war, they balked at the thought. Eventually, they fought a short war, and stopped when Indian forces were a few miles away from Lahore. Pakistan argued that though it did not lose Lahore, it kept India from winning outright. In 1971, they could have again fought a war short of ruin, with the US ready to intervene. However, India's lightning campaign in East Pakistan put paid to those plans and thus, Pakistan lost its eastern part. For a long time thereafter, General Zia-ul Haq found a way forward: he thought up a devious but effective plan of engaging vulnerable Indian states through low intensity conflicts and stayed under the radar. The approach served Pakistan well in Punjab and later, in Kashmir. During the cold war era, insurgency in Punjab kept India domestically occupied. In fact, when India's army chief Gen Sundarji launched Exercise Brasstacks in the 1980s, a rattled Zia, worried about Pakistan being severed, flew to Jaipur to discuss peace with Indian PM Rajiv Gandhi. Zia understood the benefits Pakistan could accrue through a low intensity war. Pakistan was not nuclear-ready then. Zia's 'thousand cuts policy' for India was predicated on the assumption that a low intensity conflict could continue without escalating into a full-blown war. There was a notion that persevering with continued attacks would elicit a similar response from India: a counter militancy campaign and a strong diplomatic rebuttal. The nuclearisation of Pakistan helped Rawalpindi to browbeat the world into submission through the threat of the bomb. STORY CONTINUES BELOW THIS AD Each time the ISI worked with terrorist organisations using them as a proxy, the Pakistani army got away with an excuse, and often, an indifference built on arrogance. Over two decades, India sent to Pakistan 20 letters, dossiers, DNA samples of terrorists involved in 26/11, Pathankot, Pulwama, and Nagrota. After the Pathankot attacks in 2016, a Pakistani team arrived in India, conducted interviews with 16 witnesses and were given DNA samples of four terrorists. However, Islamabad chose to discard the evidence and mocked India's claims. A Uniqueness of Op Sindoor A rogue government thrives on being unpredictable. Each time, the Pakistani generals flaunted their first mover unpredictability, India responded like a reasonable but firm neighbour. Each time, India responded diplomatically. And then, followed the quick military strikes in the last few years. This time when terrorists struck Pahalgam, Pakistan expected the Indian government to respond similarly, albeit with an aggression they sensed this government could muster. STORY CONTINUES BELOW THIS AD What Pakistan did not quite expect was the scale of response alongside the speed and the precision with which India struck to raze the terrorist bases with its first round of strikes. By taking out Abdul Rauf Azhar, Jaish e Mohammed associates of Masood Azhar and hitting army bases deep inside Pakistan, India achieved five things. One, it had taken out a terrorist who had killed a high-profile Western journalist of a global media house: Daniel Pearl. The parallels were unambiguous: Osama bin Laden was once a guest in Pakistan till the US took him out. Similarly, Azhar was a guest in Pakistan till India eliminated him. Two, more importantly, Pakistan as the guarantor failed to protect its protégé, the underwriter crashed its credibility and the confidence of Rawalpindi, that once stood on the construct of a nuclear bulwark, appeared shaken. The arrogance, an unwilling accomplice, sought to test the Indian appetite for escalation. Three, India showed the ability to strike American assets, nuclear gateways and Chinese HQ9s that presented a worrying proposition for Pakistan's sponsors. India struck ammunition dumps and bases in Rafiqui, Murid, Chaklala, Rahim Yar Khan, Sukkur, Chunian, Pasrur, and Sialkot that upset American calculations. STORY CONTINUES BELOW THIS AD Fourthly, in a controlled manner, India became a rare nuclear state to wage a successful war short of the nuclear threshold. Fifthly, India showed that while Americans deployed yesterday's weapon systems – expensive and large – in today's wars, India was using today's weapons for battlefields of tomorrow. SCALP, Harop, Schilka, loitering kamikaze drones ran Pakistani defences ragged and disembowelled any pretences. India showed how much its weapons technology had progressed. The Akash missile system, a DRDO product, neutralized aerial threats up to 25-30 km and created a dome that intercepted Pakistani missiles. Then, there was the D4 Anti-Drone detection system, Dhanush Howitzer, a modern version of Bofors, and the ATAGS (Advanced Towed Artillery Gun System). These five outcomes were too much to swallow for stakeholders in the west that believed in setting the rules and controlling their outcomes. Reactions to Indian Response We all know what happened next. Initially, the Pakistani social media assault blinded the western media into publishing incorrect versions indicating a favourable performance of the air defences. A few mischievous media platforms even published salivating inaccurate stories, their writing led by insincere journalism and a compromised conscience. With that, it was quickly assumed that India had lost the information war. Then, the fog lifted and satellite pictures of damages to the Pakistani military bases, AWACs, hangars, air bases emerged. STORY CONTINUES BELOW THIS AD Global analysts such as Tom Cooper, John Spencer and Bruce Reidel called out the destruction of Pakistani assets as evidence of how deep India could strike into Pakistan, and the whole picture changed. Tom Cooper said that India's retaliation to Pakistani aggression following Operation Sindoor was a 'clear-cut victory'. Jennifer Zeng, member of the international press association, wrote how India carried out a series of precise strikes that destroyed Pakistan's air defence systems and military bases. John Spencer said Operation Sindoor 'exceeded its strategic aims' and showcased India's military dominance. Japanese strategic expert Satoru Nagao from the Hudson Institute described India's response as a 'responsible and proper' one against Pakistan's state-sponsored terrorism. On the other hand, a well-known New York publication tried to downplay the Pakistani damage, but to no avail. Satellite pictures from neutral agencies lifted the veneer of hypocrisy hiding a biased western media, long cultivated by a cohort of manipulative deep state agencies, the American arms industry and others. These news agencies were cleverly staffed by Pakistani reporters and cunningly positioned as 'the brand of truth.' Pakistan has spoken about the downing of India's Rafales but could never produce proof whereas India produced satellite images of dismantled sites, extracted from Maxar Technologies. Though India's Chief of Defence Staff, in a recent interview, did allude to India losing aircraft but that statement doesn't deviate from the final outcome, reflected in the images of neutralised Pakistani targets. In fact, the Pakistani Prime Minister admitted to Indian strikes hitting inside Pakistan. Reality has edged closer to the truth, and so has the narrative. STORY CONTINUES BELOW THIS AD Discovering a Field Marshal Realising that the ground was slipping away from beneath their feet, Pakistan decided to play the domestic card (remember that the Pakistani army is likely to have initiated the entire mess to keep itself in power and deny Imran Khan domestic leverage). A victory was declared to prevent national embarrassment due to the revealed pictures of wrecked assets and army bases. The Pakistani air force had also wrested the 'centre of gravity' (reassigning PAF Air Vice Marshal and spokesperson Aurangzeb Ahmed's frivolous expression) from the all-powerful Pakistani army in this conflict. Air Chief Marshal Babar Siddhu and the PAF spokesman garnered limelight, which sidelined General Asim Munir. A knee jerk response followed: Munir was catapulted into a manufactured phenomenon bigger than either Zia or Musharraf, despite the more illustrious records of the two generals. Munir was promoted to the rank of a Field Marshal, spawning memes aplenty. The eternally complexed Pakistani army now had a new arch rival – the Pakistani air force. By their own admission, the Pakistanis believed the air force did well, while the army had a minor role. STORY CONTINUES BELOW THIS AD The Long Game: Mind and Matter In the aftermath of the conflict, Indian defence stocks surged up to 39 per cent. India's indigenous systems such as drones, electronic warfare systems showed that private manufacturers can play a big role in national security, and indigenously-developed platforms showcased their central utility in an operation, significantly boosting investor sentiment. The BrahMos supersonic missile witnessed an increase in orders from Philippines, Indonesia and Vietnam. The UAE and Saudi Arabia have shown an interest in BrahMos. Chengdu Aircraft also gained 36 per cent as Chinese military platforms received increased orders from Pakistan. On the other hand, Lockheed Martin's stock (LM) has been experiencing a downturn, partly due to concerns about the future of America's F-35 programme. These are material indicators of the performances of weapons. That also has explained President Donald Trump's exaggerated and somewhat comical haste to appropriate America's role in defusing the conflict. Aside from Pakistan, the other loser was America as its weapon systems did not perform to expectations. India, on the other hand, has traditionally had issues of disagreement as a democracy. This time, a team of politicians cutting across parties jointly presented India's case to the world. In Op Sindoor, a jointness among India's military forces showed the way in the war. After the war, a well thought out political jointness in its outreach to the world has shown the way forward. Messrs Jay Panda, Ravishankar Prasad, Shashi Tharoor, Shrikant Shinde from India's global outreach team have footslogged their way across countries to articulate India's case. The impact is telling: despite India taking the initiative to strike military targets inside Pakistan, none of the nation states, barring the usual supporters of the Pakistani government, have criticised India's action. Colombia, which sided with Pakistan on its comments on the conflict, reversed its decision soon. The era of running a short war and finishing with a scratch or two is over. According to Tom Cooper, Pakistan's nuclear warheads were rendered undeployable after India struck the nuclear storage facility at Kirana Hills. Using compellence as a strategy, the information war is underway, the red line of India's patience altered and the costs of waging future conflict imposed on Pakistan. It is a war intended to render undeployable Pakistan's capacity to continue a long war – economically and militarily. The writer is the author of 'Watershed 1967: India's Forgotten Victory over China' and 'Camouflaged: Forgotten Stories From Battlefields'. His fortnightly column for Firstpost — 'Beyond the Lines' — covers military history, strategic issues, international affairs and policy-business challenges. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost's views. Tweets @iProbal.
