Latest news with #MERICS
Yahoo
14-04-2025
- Business
- Yahoo
Chinese money is transforming our favourite holiday destinations
Tourism is worth more than $10 trillion (that's 10,000 billion) to the world economy every year. But is the Chinese Communist Party looking to carve off a bigger slice of that particular pie – and what might it mean for your next holiday? The idea of China shaping your next getaway may sound fanciful to most travellers (unless you're heading to Shanghai or Beijing, of course). But the Chinese government's increasingly ambitious strategy of international investments – otherwise known as the controversial Belt and Road Initiative – is increasingly expanding Beijing's presence in some of the world's most popular tourism spots. Perhaps the most dramatic example of this phenomenon so far has been the Maldives. While best known to most British travellers as an archipelago of high-end resort islands, the destination's unique and isolated location has turned into a battleground for influence between China and one of its biggest strategic rivals, India. 'India has traditionally been very concerned about Chinese investment along the coast of the Indian Ocean,' says Jacob Gunther, from the Germany-based think tank MERICS (the Mercator Institute for China Studies). 'However, the investments in the Maldives have been particularly contentious, as they're right in the middle of the ocean itself.' While India is keen to maintain a strong military presence in the ocean, China has been on a charm offensive, using its vast cash reserves to try to pry the Maldives away from its historic ally. While this investment spree might not be on the minds of tourists lazing in waterfront bungalows, it isn't entirely invisible either. It was Chinese cash that funded the upgrade and expansion of Velana International Airport – the landing point for almost every single international tourist arriving in the Maldives. The Belt and Road Initiative (or BRI) also funded a massive, modern road bridge connecting the airport with Male – the Maldives' densely-populated capital city – as well as the slightly more tourist-friendly island of Hulhumalé. If you've crossed over out of curiosity to see the 'real' Maldives, you've almost certainly been on it. Infrastructure investment is all well and good, but analysts fret that the Maldives is becoming indebted to China, which may then seek to take control of land and assets in the country in return. They point to the massive controversy surrounding China's investment into a new port in Sri Lanka – another tourist hotspot – which then fell into Beijing's hands when the South Asian country was unable to make its payments. The port story goes to the heart of the mysteries surrounding the BRI, which is understood by most analysts as a way of China expanding trade routes while also peeling some countries away from the West. 'The BRI is both a geostrategic and commercial project, so a lot of the projects are a blend of those two aims,' says Mr Gunther, who has researched China's 'political economy' for more than a decade. While the Maldives may have been one of the most contentious investments, the Chinese government and its state-backed enterprises have been making their presence felt in numerous other holiday destinations, spanning all the way from south-east Asia to the Adriatic Coast. Sometimes these investments are explicitly focused on tourism projects. In Cambodia, Chinese investment has turned the unremarkable beach-town of Sihanoukville into an enclave of skyscrapers, some of them hosting plush Chinese casino resorts, but hundreds of them unfinished, creating a dystopian feel. Some 300 miles away in Krong Siem Reap, the nearest city to Angkor Wat, China has ploughed $1.1 billion into a state-of-the-art airport. Sub-Saharan Africa has been another hotspot, with China taking advantage of a Western retreat from the continent to bolster its influence. In 2023, African countries received more than $20 billion in investment via BRI deals, much of it going into energy and transport infrastructure. Then there's the Caribbean, where a number of Commonwealth countries have signed BRI partnerships with Beijing, including Barbados, Jamaica and Trinidad and Tobago. While the Caribbean governments have relished the chance to upgrade their infrastructure, the wave of Chinese funding – which has topped $9 billion across Latin America and the Caribbean – has led the US State Department to warn about the region becoming a 'Chinese lake'. Closer to home, China has unnerved some Western governments by becoming a significant investor in parts of the Western Balkans, most notably the emerging tourism hotspot of Montenegro. Alongside some hotel developments backed by private Chinese investors, Beijing has also embarked on creating a new motorway connecting the coastal towns of Budva and Tivat. The building splurge comes amid concerns that overdevelopment is spoiling the character of the region. 'China has an interest in some of the Balkan countries like Montenegro as it regards them as future EU states and thus a potential route for influence in future European decision-making,' says Vladimir Shopov, a BRI expert with the European Council on Foreign Relations think tank. What will it mean for tourists? To date, Chinese-backed tourism investments haven't proved massively successful. The ambitious project of Sihanoukville remains a ghost town, as does a similar project called Forest City in Malaysia. Those Western travellers who have used the new Siem Reap airport have been baffled to find it almost entirely empty. The other possibility is that the BRI could result in more Chinese tourism. While outbound Chinese tourism was grounded by the pandemic, it has been rising in recent years, with the number of overseas trips taken by Chinese nationals projected to rise to 128 million by the end of 2028. 'A lot of countries are keen to get Chinese tourists, but there haven't necessarily been any explicit links between BRI investments and expanding tourism,' says Mr Shopov. 'If you look at Montenegro, tourism is still down on pre-pandemic levels, and Chinese tourism to Europe is still down significantly compared to 2019.' 'While tourism isn't a major focus for the BRI, there is often a link between countries which have strong trade links with China and those which receive a lot of Chinese tourism,' says Jacob Gunther from MERICS. Indeed, Chinese visitors to Cambodia rose some 55 per cent in 2024, although he cautions against attributing the increase entirely to any one factor. Perhaps we shouldn't be expecting the CCP or its state-backed allies to displace the likes of Hilton or Marriott in their dominance of the tourism world any time soon. But with Chinese influence increasing across the globe – including in the West – the chances of Beijing playing a role in your next holiday are probably nowhere near as remote as you think. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
14-04-2025
- Business
- Telegraph
Chinese money is transforming our favourite holiday destinations
Tourism is worth more than $10 trillion (that's 10,000 billion) to the world economy every year. But is the Chinese Communist Party looking to carve off a bigger slice of that particular pie – and what might it mean for your next holiday? The idea of China shaping your next getaway may sound fanciful to most travellers (unless you're heading to Shanghai or Beijing, of course). But the Chinese government's increasingly ambitious strategy of international investments – otherwise known as the controversial Belt and Road Initiative – is increasingly expanding Beijing's presence in some of the world's most popular tourism spots. The battle for the Maldives Perhaps the most dramatic example of this phenomenon so far has been the Maldives. While best known to most British travellers as an archipelago of high-end resort islands, the destination's unique and isolated location has turned into a battleground for influence between China and one of its biggest strategic rivals, India. 'India has traditionally been very concerned about Chinese investment along the coast of the Indian Ocean,' says Jacob Gunther, from the Germany-based think tank MERICS (the Mercator Institute for China Studies). 'However, the investments in the Maldives have been particularly contentious, as they're right in the middle of the ocean itself.' While India is keen to maintain a strong military presence in the ocean, China has been on a charm offensive, using its vast cash reserves to try to pry the Maldives away from its historic ally. While this investment spree might not be on the minds of tourists lazing in waterfront bungalows, it isn't entirely invisible either. It was Chinese cash that funded the upgrade and expansion of Velana International Airport – the landing point for almost every single international tourist arriving in the Maldives. The Belt and Road Initiative (or BRI) also funded a massive, modern road bridge connecting the airport with Male – the Maldives' densely-populated capital city – as well as the slightly more tourist-friendly island of Hulhumalé. If you've crossed over out of curiosity to see the 'real' Maldives, you've almost certainly been on it. Infrastructure investment is all well and good, but analysts fret that the Maldives is becoming indebted to China, which may then seek to take control of land and assets in the country in return. They point to the massive controversy surrounding China's investment into a new port in Sri Lanka – another tourist hotspot – which then fell into Beijing's hands when the South Asian country was unable to make its payments. The port story goes to the heart of the mysteries surrounding the BRI, which is understood by most analysts as a way of China expanding trade routes while also peeling some countries away from the West. 'The BRI is both a geostrategic and commercial project, so a lot of the projects are a blend of those two aims,' says Mr Gunther, who has researched China's 'political economy' for more than a decade. Empty skyscrapers and ghost airports While the Maldives may have been one of the most contentious investments, the Chinese government and its state-backed enterprises have been making their presence felt in numerous other holiday destinations, spanning all the way from south-east Asia to the Adriatic Coast. Sometimes these investments are explicitly focused on tourism projects. In Cambodia, Chinese investment has turned the unremarkable beach-town of Sihanoukville into an enclave of skyscrapers, some of them hosting plush Chinese casino resorts, but hundreds of them unfinished, creating a dystopian feel. Some 300 miles away in Krong Siem Reap, the nearest city to Angkor Wat, China has ploughed $1.1 billion into a state-of-the-art airport. Sub-Saharan Africa has been another hotspot, with China taking advantage of a Western retreat from the continent to bolster its influence. In 2023, African countries received more than $20 billion in investment via BRI deals, much of it going into energy and transport infrastructure. Then there's the Caribbean, where a number of Commonwealth countries have signed BRI partnerships with Beijing, including Barbados, Jamaica and Trinidad and Tobago. While the Caribbean governments have relished the chance to upgrade their infrastructure, the wave of Chinese funding – which has topped $9 billion across Latin America and the Caribbean – has led the US State Department to warn about the region becoming a 'Chinese lake'. A European toehold Closer to home, China has unnerved some Western governments by becoming a significant investor in parts of the Western Balkans, most notably the emerging tourism hotspot of Montenegro. Alongside some hotel developments backed by private Chinese investors, Beijing has also embarked on creating a new motorway connecting the coastal towns of Budva and Tivat. The building splurge comes amid concerns that overdevelopment is spoiling the character of the region. 'China has an interest in some of the Balkan countries like Montenegro as it regards them as future EU states and thus a potential route for influence in future European decision-making,' says Vladimir Shopov, a BRI expert with the European Council on Foreign Relations think tank. What will it mean for tourists? To date, Chinese-backed tourism investments haven't proved massively successful. The ambitious project of Sihanoukville remains a ghost town, as does a similar project called Forest City in Malaysia. Those Western travellers who have used the new Siem Reap airport have been baffled to find it almost entirely empty. The other possibility is that the BRI could result in more Chinese tourism. While outbound Chinese tourism was grounded by the pandemic, it has been rising in recent years, with the number of overseas trips taken by Chinese nationals projected to rise to 128 million by the end of 2028. 'A lot of countries are keen to get Chinese tourists, but there haven't necessarily been any explicit links between BRI investments and expanding tourism,' says Mr Shopov. 'If you look at Montenegro, tourism is still down on pre-pandemic levels, and Chinese tourism to Europe is still down significantly compared to 2019.' 'While tourism isn't a major focus for the BRI, there is often a link between countries which have strong trade links with China and those which receive a lot of Chinese tourism,' says Jacob Gunther from MERICS. Indeed, Chinese visitors to Cambodia rose some 55 per cent in 2024, although he cautions against attributing the increase entirely to any one factor. Perhaps we shouldn't be expecting the CCP or its state-backed allies to displace the likes of Hilton or Marriott in their dominance of the tourism world any time soon. But with Chinese influence increasing across the globe – including in the West – the chances of Beijing playing a role in your next holiday are probably nowhere near as remote as you think.
Egypt Independent
10-04-2025
- Business
- Egypt Independent
The US-China trade escalation has no end in sight. Here's why Beijing's not backing down
Hong Kong CNN — What was supposed to be a historic, era-defining trade war launched by US President Donald Trump against a range of countries has, for now, narrowed in on a singular target: China. Trump announced a three-month pause Wednesday on all the 'reciprocal' tariffs that had gone into effect hours earlier – with one exception, deepening a confrontation set to dismantle trade between the world's two largest economies. Then on Thursday, Beijing made good on its vow to bring in its own retaliatory tariffs. The pace of that escalation has been stunning. Over the course of a week, Trump's tariffs on Chinese imports have jumped from 54 percent to 104 percent and now 125 percent – figures that add to existing levies imposed prior to the president's second term. And China has retaliated in kind, raising additional, retaliatory duties on all US imports to 84 percent. The showdown sets up an historic rupture that will not only cause pain for both of these deeply intertwined economies – but add tremendous friction to their geopolitical rivalry. 'This is probably the strongest indication we've seen pushing towards a hard decoupling,' said Nick Marro, principal economist for Asia at the Economist Intelligence Unit, referring to an outcome where the two economies have virtually no trade or mutual investment. 'It's really hard to overstate the expected shocks this is going to have, not just to the Chinese economy itself, but also to the entire global trading landscape,' as well as on the US, he said. Trump appeared to link his decision not to grant China the same reprieve as other nations to Beijing's swift retaliation, telling reporters Wednesday that 'China wants to make a deal, they just don't know how quite to go about it.' But the view from Beijing looks dramatically different. Chinese leader Xi Jinping, China's most powerful leader in decades, sees no option for his country to simply capitulate to what it calls America's 'unilateral bullying.' And he's playing to the crowd. Publicly, Beijing has drummed up fervent nationalism around its retaliation – part of a strategy it's been quietly preparing for more than four years since Trump was last in office. While China has long said it wants to talk, Trump's rapid escalation instead appears to have confirmed for Beijing that the US doesn't. And in Xi's calculation, observers say, China is prepared not just to fight back, but to use Trump's trade turmoil to strengthen its own position. 'Xi has been very clear for a very long time that he expects China will enter a period of protracted struggle with the United States and its allies, that China needed to prepare for that, and they have quite extensively,' said Jacob Gunter, lead economy analyst at Berlin-based think tank MERICS. 'Xi Jinping has accepted that the gauntlet is thrown down, and they are ready to put up a fight.' Employees produce basketballs for export at a factory in eastern China's Jiangsu province last month. AFP/Getty Images 'War of attrition' Whether Trump would have suspended his so-called retaliatory tariffs on China alongside other nations had Beijing not moved so swiftly to retaliate remains an open question. Canada had retaliated but was included in the reprieve, which does not remove a 10 percent universal tariff imposed last week. Regardless, Trump, who the White House described earlier this week as having a 'spine of steel,' and Xi now appear locked in a war of attrition with the potential to upset a lopsided but highly integrated trade relationship worth roughly half a trillion dollars. For decades, China has been the world's factory floor, where increasingly automated and high-tech production chains churn out everything from household goods and shoes to electronics, raw materials for construction, appliances and solar panels. Those factories satisfied the demand of American and global consumers for affordable goods but fueled an enormous trade deficit – and a feeling among some Americans, including Trump, that globalization has stolen US manufacturing and jobs. Trump's ratcheting up of tariffs to well over 125 percent could now cut China's exports to the US by more than half in the coming years, by some estimates. Many goods from China won't be able to be quickly replaced – driving up US consumer prices, potentially for years, before new factories come online. That could ring up a tax hike for Americans of roughly $860 billion before substitutions, JP Morgan analysts said Wednesday. In China, a wide swath of suppliers are likely to see their already narrow margins completely erased, with a new wave of efforts to establish factories in other countries set to begin. The scale of the tariffs could lead to 'millions of people becoming unemployed' and a 'wave of bankruptcy' across China, according to Victor Shih, director of the University of California San Diego's 21st Century China Center. Meanwhile, US exports to China could 'go close to zero,' he added. Shipping containers sit at a port in China's Tianjin in February. Florence Lo/Reuters 'But China can sustain that (situation) much more so than American politicians can,' he said. That's, in part, because China's ruling Communist Party leaders do not face swift feedback from voters and opinions polls. 'During Covid they shut down the economy (causing) untold employment, suffering – no problem.' Beijing too believes it can weather the storm. 'In response to US tariffs, we are prepared and have strategies. We have engaged in a trade war with the US for eight years, accumulating rich experience in these struggles,' a commentary on the front page of Communist Party mouthpiece People's Daily said Monday. It noted Beijing could take 'extraordinary efforts' to boost domestic consumption, which has been persistently weak, and introduce other policy measures to support its economy. 'The plans to respond are well-prepared and ample,' the commentary said. And in the face of unknowns about how much further measures could escalate, voices from Beijing appear calm. 'The ultimate outcome hinges on who can withstand a longer 'economic war of attrition,'' economist Cai Tongjuan of China's Renmin University wrote in a state media op-ed earlier this week. 'And China clearly holds a greater advantage in terms of strategic endurance.' US President Donald Trump signs executive orders and proclamations in the Oval Office at the White House on April 9. Nathan Howard/Reuters 'Preparing for this day' Beijing in recent weeks has also been talking to countries from Europe to Southeast Asia in a bid to expand trade cooperation – and one up the US by winning over American allies and partners exasperated by the on-again-off-again trade war. But it's been bracing for US trade frictions since Trump's first trade war and his campaign against Chinese tech champion Huawei, which were a wake-up call to Beijing that its economic rise could be derailed if it wasn't prepared. 'The Chinese government have been preparing for this day for six years – they knew this was a possibility,' said Shih in California, who added that Beijing had supported countries to diversify supply chains and looked to manage some of its domestic economic challenges in preparation, among other efforts. Today, China is much better placed to weather a broader trade conflict, experts say. Compared with 2018, it's expanded its trade relations with the rest of the world, reducing the share of US exports from roughly one-fifth of its total to less than 15 percent. Its manufacturers have also set up extensive operations in third countries like Vietnam and Cambodia, in part to take advantage of potentially lower US duties. China has also built out its supply chains for rare earths and other critical minerals, upgraded its manufacturing technology with AI and humanoid robots and ramped up its advanced technology capabilities, including semiconductors. Since last year, the government has also worked, with varying success, to address issues like weak consumption and high local government debt. '(China's) weaknesses are significant, but in the context of an all-out brawl, these are manageable. The US is not going to be able to, on its own, bring China's economy to the edge of destruction,' said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies think tank in the US. 'As much as Washington doesn't want to admit it, when China says you can't contain China economically, they have a point.'
Yahoo
10-04-2025
- Business
- Yahoo
The US-China trade escalation has no end in sight. Here's why Beijing's not backing down
What was supposed to be a historic, era-defining trade war launched by US President Donald Trump against a range of countries has, for now, narrowed in on a singular target: China. On Wednesday, Trump announced a three-month pause on all the 'reciprocal' tariffs that had gone into effect hours earlier – with one exception, deepening a confrontation set to dismantle trade between the world's two largest economies. The pace of that escalation has been stunning. Over the course of a week, Trump's tariffs on Chinese imports have jumped from 54% to 104% and now 125% – figures that add to existing levies imposed prior to the president's second term. And China has retaliated in kind, raising additional, retaliatory duties on all US imports to 84%. The showdown sets up an historic rupture that will not only cause pain for both of these deeply intertwined economies – but add tremendous friction to their geopolitical rivalry. 'This is probably the strongest indication we've seen pushing towards a hard decoupling,' said Nick Marro, principal economist for Asia at the Economist Intelligence Unit, referring to an outcome where the two economies have virtually no trade or mutual investment. 'It's really hard to overstate the expected shocks this is going to have, not just to the Chinese economy itself, but also to the entire global trading landscape,' as well as on the US, he said. Trump appeared to link his decision not to grant China the same reprieve as other nations to Beijing's swift retaliation, telling reporters Wednesday that 'China wants to make a deal, they just don't know how quite to go about it.' But the view from Beijing looks dramatically different. Chinese leader Xi Jinping, China's most powerful leader in decades, sees no option for his country to simply capitulate to what it calls America's 'unilateral bullying.' And he's playing to the crowd. Publicly, Beijing has drummed up fervent nationalism around its retaliation – part of a strategy it's been quietly preparing for more than four years since Trump was last in office. While China has long said it wants to talk, Trump's rapid escalation instead appears to have confirmed for Beijing that the US doesn't. And in Xi's calculation, observers say, China is prepared not just to fight back, but to use Trump's trade turmoil to strengthen its own position. 'Xi has been very clear for a very long time that he expects China will enter a period of protracted struggle with the United States and its allies, that China needed to prepare for that, and they have quite extensively,' said Jacob Gunter, lead economy analyst at Berlin-based think tank MERICS. 'Xi Jinping has accepted that the gauntlet is thrown down, and they are ready to put up a fight.' Whether Trump would have suspended his so-called retaliatory tariffs on China alongside other nations had Beijing not moved so swiftly to retaliate remains an open question. Canada had retaliated but was included in the reprieve, which does not remove a 10% universal tariff imposed last week. Regardless, Trump, who the White House described earlier this week as having a 'spine of steel,' and Xi now appear locked in a war of attrition with the potential to upset a lopsided but highly integrated trade relationship worth roughly half a trillion dollars. For decades, China has been the world's factory floor, where increasingly automated and high-tech production chains churn out everything from household goods and shoes to electronics, raw materials for construction, appliances and solar panels. Those factories satisfied the demand of American and global consumers for affordable goods but fueled an enormous trade deficit – and a feeling among some Americans, including Trump, that globalization has stolen US manufacturing and jobs. Trump's ratcheting up of tariffs to well over 125% could now cut China's exports to the US by more than half in the coming years, by some estimates. Many goods from China won't be able to be quickly replaced – driving up US consumer prices, potentially for years, before new factories come online. That could ring up a tax hike for Americans of roughly $860 billion before substitutions, JP Morgan analysts said Wednesday. In China, a wide swath of suppliers are likely to see their already narrow margins completely erased, with a new wave of efforts to establish factories in other countries set to begin. The scale of the tariffs could lead to 'millions of people becoming unemployed' and a 'wave of bankruptcy' across China, according to Victor Shih, director of the University of California San Diego's 21st Century China Center. Meanwhile, US exports to China could 'go close to zero,' he added. 'But China can sustain that (situation) much more so than American politicians can,' he said. That's, in part, because China's ruling Communist Party leaders do not face swift feedback from voters and opinions polls. 'During Covid they shut down the economy (causing) untold employment, suffering – no problem.' Beijing too believes it can weather the storm. 'In response to US tariffs, we are prepared and have strategies. We have engaged in a trade war with the US for eight years, accumulating rich experience in these struggles,' a commentary on the front page of Communist Party mouthpiece People's Daily said Monday. It noted Beijing could take 'extraordinary efforts' to boost domestic consumption, which has been persistently weak, and introduce other policy measures to support its economy. 'The plans to respond are well-prepared and ample,' the commentary said. And in the face of unknowns about how much further measures could escalate, voices from Beijing appear calm. 'The ultimate outcome hinges on who can withstand a longer 'economic war of attrition,'' economist Cai Tongjuan of China's Renmin University wrote in a state media op-ed earlier this week. 'And China clearly holds a greater advantage in terms of strategic endurance.' Beijing in recent weeks has also been talking to countries from Europe to Southeast Asia in a bid to expand trade cooperation – and one up the US by winning over American allies and partners exasperated by the on-again-off-again trade war. But it's been bracing for US trade frictions since Trump's first trade war and his campaign against Chinese tech champion Huawei, which were a wake-up call to Beijing that its economic rise could be derailed if it wasn't prepared. 'The Chinese government have been preparing for this day for six years – they knew this was a possibility,' said Shih in California, who added that Beijing had supported countries to diversify supply chains and looked to manage some of its domestic economic challenges in preparation, among other efforts. Today, China is much better placed to weather a broader trade conflict, experts say. Compared with 2018, it's expanded its trade relations with the rest of the world, reducing the share of US exports from roughly one-fifth of its total to less than 15%. Its manufacturers have also set up extensive operations in third countries like Vietnam and Cambodia, in part to take advantage of potentially lower US duties. China has also built out its supply chains for rare earths and other critical minerals, upgraded its manufacturing technology with AI and humanoid robots and ramped up its advanced technology capabilities, including semiconductors. Since last year, the government has also worked, with varying success, to address issues like weak consumption and high local government debt. '(China's) weaknesses are significant, but in the context of an all-out brawl, these are manageable. The US is not going to be able to, on its own, bring China's economy to the edge of destruction,' said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies think tank in the US. 'As much as Washington doesn't want to admit it, when China says you can't contain China economically, they have a point.'
CNN
10-04-2025
- Business
- CNN
Analysis: The US-China trade escalation has no end in sight. Here's why Beijing's not backing down
What was supposed to be a historic, era-defining trade war launched by US President Donald Trump against range of countries has, for now, narrowed in on a singular target: China. On Wednesday, Trump announced a three-month pause on all the 'reciprocal' tariffs that had gone into effect hours earlier – with one exception, deepening a confrontation set to dismantle trade between the world's two largest economies. The pace of that escalation has been stunning. Over the course of a week, Trump's tariffs on Chinese imports have jumped from 54% to 104% and now 125% – figures that add to existing tariffs imposed prior to the president's second term. And China has retaliated in kind raising additional, retaliatory duties on all US imports to 84%. The showdown sets up an historic rupture that will not only cause pain for both of these deeply intertwined economies – but add tremendous friction to geopolitical rivalry. 'This is probably the strongest indication we've seen pushing towards a hard decoupling,' said Nick Marro, principal economist for Asia at the Economist Intelligence Unit, referring to an outcome where the two economies have virtually no trade or mutual investment. 'It's really hard to overstate the expected shocks this is going to have, not just to the Chinese economy itself, but also to the entire global trading landscape,' as well as on the US, he said. Trump appeared to link his decision not to grant China the same reprieve as other nations to Beijing's swift retaliation, telling reporters Wednesday that 'China wants to make a deal, they just don't know how quite to go about it.' But the view from Beijing looks dramatically different. Chinese leader Xi Jinping, China's most powerful leader in decades, sees no option for his country to simply capitulate to what it calls America's 'unilateral bullying.' And he's playing to his crowd. Publicly, Beijing has drummed up fervent nationalism around its retaliation – part of a strategy it's been quietly preparing for more than four years since Trump was last in office. While China has long said it wants to talk, Trump's rapid escalation instead appears to have confirmed for Beijing that the US doesn't. And in Xi's calculation, observers say, China is prepared not just to fight back, but to use Trump's trade turmoil to strengthen its own position. 'Xi has been very clear for a very long time that he expects China will enter a period of protracted struggle with the United States and its allies, that China needed to prepare for that, and they have quite extensively,' said Jacob Gunter, lead economy analyst at Berlin-based think tank MERICS. 'Xi Jinping has accepted that the gauntlet is thrown down, and they are ready to put up a fight,' Gunter said. Whether Trump would have suspended his so-called retaliatory tariffs on China alongside other nations had Beijing not moved so swiftly to retaliate remains an open question. Canada had retaliated but was included in the reprieve, which does not remove a 10% universal tariff imposed last week. Regardless, Trump, who the White House described earlier this week as having a 'spine of steel,' and Xi now appear locked in a war of attrition with the potential to upset a lopsided but highly integrated trade relationship worth roughly half a trillion dollars. For decades, China has been the world's factory floor, where increasingly automated and high-tech production chains churn out everything from household goods and shoes to electronics, raw materials for construction, appliances and solar panels. Those factories satisfied the demand of American and global consumers for affordable goods but fueled an enormous trade deficit – and a feeling among some Americans, including Trump, that globalization has stolen American manufacturing and jobs. Trump's ratcheting up of tariffs to well over 125% could now cut China's exports to the US by more than half in the coming years, by some estimates. Many goods from China won't be able to be quickly replaced – driving up American consumer prices, potentially for years, before new factories come online. That could ring up a tax hike for Americans of roughly $860 billion before substitutions, JP Morgan analysts said Wednesday. In China, a wide swath of suppliers are likely to see their already narrow margins completely erased, with a new wave of efforts to establish factories in other countries set to begin. The scale of the tariffs could lead to 'millions of people becoming unemployed' and a 'wave of bankruptcy' across China, according to Victor Shih, director of the University of California San Diego's 21st Century China Center. Meanwhile, US exports to China could 'go close to zero,' he added. 'But China can sustain that (situation) much more so than American politicians can,' he said. That's, in part, because China's ruling Communist Party leaders do not face swift feedback from voters and opinions polls. 'During Covid they shut down the economy (causing) untold employment, suffering – no problem.' Beijing too believes it can weather the storm. 'In response to US tariffs, we are prepared and have strategies. We have engaged in a trade war with the US for eight years, accumulating rich experience in these struggles,' a commentary on the front page of the People's Daily said Monday. It noted Beijing could take 'extraordinary efforts' to boost domestic consumption, which has been persistently weak, and introduce other policy measures to support its economy. 'The plans to respond are well-prepared and ample,' the commentary said. And in the face of unknowns about how much further measures could escalate, voices from Beijing appear calm. 'The ultimate outcome hinges on who can withstand a longer 'economic war of attrition,'' economist Cai Tongjuan of China's Renmin University wrote in a state media op-ed earlier this week. 'And China clearly holds a greater advantage in terms of strategic endurance.' Beijing in recent weeks has also been reaching out to US allies and trading partners from Europe to Southeast Asia in a bid to expand its trade cooperation – and one up the US by winning over American allies and partners exasperated by the on-again-off-again trade war. But it's been bracing for US trade frictions since Trump's first trade war and his campaign against Chinese tech champion Huawei, which were a wake-up call to Beijing that its economic rise could be derailed if it wasn't prepared. Today, China is much better placed to weather a broader trade conflict, experts say. Compared with 2018, it's expanded its trade relations with the rest of the world, reducing the share of US exports from roughly one-fifth of its total to less than 15%. Its manufacturers have also set up extensive operations in third countries like Vietnam and Cambodia, in part to take advantage of potentially lower US duties. China has also built out its supply chains for rare earths and other critical minerals, upgraded its manufacturing technology with AI and humanoid robots and ramped up its advanced technology capabilities, including semi-conductors. Since last year, the government has also worked, with varying success, to address issues like weak consumption and high local government debt. '(China's) weaknesses are significant, but in the context of an all-out brawl, these are manageable. The US is not going to be able to, on its own, bring China's economy to the edge of destruction,' said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies think tank in the US. 'As much as Washington doesn't want to admit it, when China says you can't contain China economically, they have a point.'
