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Why the tariff confrontation is not the only thing on his mind
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In Beijing, springtime warmth has begun to draw queues to restaurants that offer al-fresco dining; trendy shopping districts are growing more crowded. Mr Jia, a 36-year-old investor, says he is not bothered by America’s tariffs. Standing outside his friend’s cupcake shop, he says Donald Trump’s levies are a sign that America feels threatened by China’s rise. America’s power is declining, he says. “To be honest, what you feel in today’s world is that hegemony is very hard to achieve.”
The trade war is everywhere in China. State media are trumpeting President Xi Jinping’s support for “multilateralism and international trade rules”. News broadcasts have been at pains to show Mr Xi on a visit to South-East Asia, “creating development opportunities” and supporting “regional economic integration” in the face of maga protectionism. China has warned other countries it will retaliate if they buckle to American pressure to impose tariffs on China. There is some evidence China’s charm-and-harm campaign is working. On April 22nd it was reported that Mr Xi will be presented this week with a letter from Ishiba Shigeru, Japan’s prime minister, aimed at maintaining stable Sino-Japanese trade links.
Yet for the man running China, what matters more is the domestic picture. Relations with the United States and the world are “not top of the list for the things that might keep him awake at night”, says a former senior American intelligence official. Part of that calculus relates to the economic consequences within China of the trade war. The other is less noticed, but critical. Just as the economy is battling unprecedented headwinds, Mr Xi’s remorseless campaign to drive out corruption and enforce loyalty in the top ranks of the party is generating turbulence.
Officials have seized on data that appear to show China’s ability to withstand tariffs. On April 16th they declared first-quarter growth of 5.4% year-on-year, better than predicted and ahead of a full-year target of about 5%. The figure was buoyed by stimulus and a front-running of exports ahead of tariffs: the volume of shipping containers processed rose by 10% year-on-year in the seven days to April 20th, according to Bloomberg. Still, economists expect a sharp slowdown. Freight activity indicators suggest a drop is coming, according to a survey by Goldman Sachs. Before “liberation day”, ubs predicted growth of 4% in 2025. It now reckons 3.4%, assuming the levies remain.
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Communist Party leaders are paranoid about social stability and Mr Xi will be watching how an export and industrial slowdown might filter through into fragile public confidence. There are signs of nervousness. A survey by Morgan Stanley after tariffs began escalating this month found that 44% of more than 2,000 respondents in cities across China were worried that they or family members might lose their jobs, with many citing the levies. This was the highest share since the bank began conducting such polls in 2020, amid the pandemic.
In terms of the relative negotiating hand China has with America, a weakening of domestic confidence has to be weighed against the carnage in the United States. On April 22nd reports emerged that Scott Bessent, the treasury secretary, had reassured investors in a private meeting that a trade deal with China would eventually be struck. Nonetheless, for now Mr Xi is likely to stimulate more in order to prop up consumers. “We have the ability and confidence to address external challenges,” according to a statistics official. The Politburo will meet in late April, which may be the moment for more measures to boost housing and consumption as well as industry.
At that Politburo meeting Mr Xi’s other domestic obsession may be visible: a never-ending purge of the military. One of the Politburo’s members has not been seen in public since early March. He is General He Weidong, one of two vice-chairmen of the Central Military Commission (number three in the military hierarchy). He was absent from a tree-planting activity in Beijing in early April attended by Mr Xi and other commission members. State television did not show him at a conference on diplomacy on April 8th and 9th. His fellow vice-chairman, Zhang Youxia, was there with other Politburo members. If General He has been purged, he would be the highest-ranking uniformed member of the commission to be dismissed since 1967.
That would show Mr Xi’s military purges are not over. Li Shangfu, then the defence minister, was targeted in October 2023. Miao Hua was placed under investigation in November 2024—he was an admiral in charge of the Political Work Department of the pla, a job responsible for enforcing loyalty to Mr Xi. In March a senior member of the military commission’s anti-graft unit, Lieutenant General Tang Yong, lost his job as an adviser to the national legislature. Such shakeups are not a sideshow: the pla is a core component of the Communist Party itself and purges may have weakened its combat effectiveness according to American intelligence.
The interplay between the economic consequences of the trade war and signs of turmoil at the top of the party are crucial to understanding China. In one scenario the trade war forces it to liberalise its economy, boosting consumption rather than state-led investment and easing up on entrepreneurs. It could woo its neighbours. But in a more paranoid environment it could embrace a more nationalistic pivot in order to rally the public. This strand is visible already. On April 15th China’s spy chief, Chen Yixin, warned that China must “resolutely win the comprehensive war against hegemony”. China’s grey-zone activities designed to intimidate Taiwan are operating at an intense pace.
More than the outside world, or even what happens inside China, what probably matters most of all to Mr Xi is his own position and legacy. That will be decided in 2027 when the next party congress takes place, at which many analysts expect him to seek a fourth term as the party’s boss. The next 24 months may be his biggest test yet. ■
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China’s propagandists preach defiance in the trade war with America
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The public seems on board, for now
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Источник: www.economist.com