China Prepares for Worst-Case Scenario in Trade Dispute with the US

In the ongoing trade dispute with the United States, the Chinese government is taking proactive measures to brace its economy and society for potentially severe consequences. The inner circle of the ruling Communist Party has emphasized the need to plan for the 'worst-case scenario,' as reported by the state-run news agency Xinhua following a Politburo meeting chaired by Xi Jinping, the country's top leader.

China is increasingly facing 'external shocks' that threaten its economic stability, prompting calls from party officials to enhance economic tools aimed at stabilizing employment and the overall economy. Early implementation of planned political measures has been urged, alongside a continued loose monetary policy and timely interest rate reductions.

While specific details regarding these initiatives remain undisclosed, there is a clear focus on boosting domestic consumption by increasing earnings for lower and middle-income groups. This strategy aims to invigorate domestic consumption, which has been sluggish, thereby driving economic growth. Additionally, firms adversely affected by the tariffs imposed during the trade conflict are expected to receive further support.

The trade conflict between China and the United States continues to escalate. The key decision-making body of the Communist Party convened after conflicting statements emerged from both sides regarding ongoing negotiations. President Trump has imposed tariffs as high as 145% on Chinese goods, while China retaliated with tariffs reaching 125% on US products. However, Beijing has denied claims of discussions with the US, labeling them as 'fake news.'

In a potential sign of easing tensions, reports indicate that Chinese customs may be relaxing tariffs on certain critical technology imports from the United States, specifically on semiconductors. This could indicate a willingness to negotiate amidst the ongoing trade war, given China's reliance on American technology leaders for semiconductor supplies.

While China has ruled out any further increases in tariffs against the US, it has implemented strict regulations on the export of essential raw materials and magnets earlier this month, complicating the trade landscape. As these developments unfold, the focus remains on the economic strategies employed by China to navigate through these challenging times.