When US President Donald Trump took office just over a year ago with an “America First” agenda, many saw trouble for China’s sluggish economy, but Beijing has thawed frosty relationships with other trade partners to post a record trade surplus.
While Trump’s policies have strained ties with traditional US allies, China has turned its focus to fostering ties with key partners, including Canada and India, analysts say.
As a result, the world’s second-largest economy’s trade surplus hit a record US$1.2 trillion last year, monthly foreign exchange inflows touched US$100 billion, the largest ever, and the global usage of China’s currency, the yuan, has expanded.
After British Prime Minister Keir Starmer landed in China on Wednesday evening hoping to reinvigorate recently strained business ties, analysts and experts say Beijing is expected to further expand its global political and economic influence.
Backed by its US$20 trillion economy and US$45 trillion stock and bond markets, China is emerging as a “steady partner” for many nations, Boston College economics professor Aleksandar Tomic said.
“I think China has done a good job, and rightly so, to position itself as the reliable and stable trade partner,” said Derrick Irwin, cohead of intrinsic emerging markets equity at Allspring Global Investments. “They basically said: ‘Look, you’ve got a massive trade partner in the US that’s become a little more uncertain. We can offer predictability and certainty,’ and I think that’s very fair.”
Starmer’s four-day visit to China is the first by a British prime minister since 2018 and follows that of Canadian Prime Minister Mark Carney earlier this month, the first Canadian prime minister to visit Beijing since 2017.
During Carney’s visit the two nations signed an economic deal to tear down trade barriers and forge a new strategic relationship. Carney described China as “a more predictable and reliable partner.”
However, China is not alone in eyeing new trade pacts to de-risk from the US. India and the EU on Tuesday struck a long-delayed trade deal that would slash tariffs on most goods, boosting two-way trade to potentially double European exports to the South Asian nation by 2032.
While the world’s two largest economies have been locked in geopolitical disputes for the past few years, Trump’s return to the White House on Jan. 20 last year sharply escalated tensions on multiple fronts, including trade and technology.
Trump raised tariffs on China to more than 100 percent in April last year, before partially reversing and settling for a temporary truce, while Beijing boosted its exports to non-US markets, and rolled out support measures for its private enterprises and markets.
Chinese shipments to the US fell 20 percent last year, but rose 25.8 percent to Africa, 7.4 percent to Latin America, 13.4 percent to Southeast Asia and 8.4 percent to the EU.
“Many countries previously have not been China-friendly are now kind of pivoting to China ... because the United States is becoming a lot less predictable,” Tomic said. “The more the US gets difficult to deal with, the more it opens up for China.”
Despite the trade tensions with the US, China’s economy, under deflationary pressure at home due to weak domestic consumption and a long-term property sector slump, met the government’s target of 5 percent growth last year.
China has taken a raft of measures to boost foreign investment, including pilot programs in Beijing, Shanghai and other regions to expand market access in services such as telecoms, healthcare and education.
The nation recorded the largest-ever monthly foreign exchange inflows of US$100.1 billion last month, according to its regulator. Its official foreign exchange reserves hit a 10-year high of US$3.36 trillion.
Its financial market has emerged robust from trade disputes, with the Shanghai index climbing 27 percent over the past year, outperforming US equities, market turnover hitting a record high and the yuan expanding its global usage.
With the US dollar becoming less appealing to investors due to Trump’s erratic approach to trade and international diplomacy, Beijing is also pushing ahead with its ambition to bolster the global usage of the yuan, bankers with knowledge of the matter said.
Some of the big global banks are scrambling to boost yuan liquidity in offshore hubs, and put in place frameworks for faster payment settlements in yuan in trade corridors of China and Southeast Asia, the Middle East and Europe, they said.
“We have seen quite a few cycles of China trying to internationalize yuan and then pulling back,” a banker at a global bank with a China presence said. “This time it’s different... Trump policies are very conducive for boosting yuan usage.”
More than half of China’s cross-border transactions are now settled in yuan, from almost none 15 years ago, while nearly half of China’s overseas bank lending is now in yuan, according to the latest data from the central bank, but some foreign policy analysts caution against China’s new, friendlier economic and political playbook.
Despite the new trade pacts, Patricia Kim, a foreign policy fellow at the Washington-based Brookings Institution, said distrust of the US does not translate into trust in Beijing for US allies and partners.
“Many of these countries harbor deep concerns about China’s approach to trade, its use of economic coercion, and unresolved maritime and historical disputes,” Kim said. “In the current moment, China may appear more restrained or pragmatic when compared with the Trump administration’s extreme rhetoric and actions, but Beijing’s actual behavior has not been especially reassuring.”
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