China’s Li Qiang criticises tariffs as record trade surplus irks export markets

BEIJING – China’s Premier Li Qiang on Dec 9 urged trading partners to reject rising protectionism, a day after the world’s second-largest economy

posted a record US$1 trillion (S$1.3 trillion) trade surplus

driven by a rush of exports to non-US markets.

Beijing is now facing broadening tensions with major trading partners beyond the US, which are calling on China to do more to reform its US$19 trillion economy and reduce its dependence on exports to support growth.

China’s second-ranking official urged the heads of the International Monetary Fund, World Bank, World Trade Organization and others to strengthen global governance in response to the growing number of economies imposing levies on imported goods, China included.

“Since the beginning of the year, the threat of tariffs has loomed over the global economy, with various trade restrictions proliferating and severely impacting global economic activity,” Mr Li told the “1+10 Dialogue” in Beijing, which also includes officials from the Organisation for Economic Co-operation and Development and International Labour Organization.

“The mutually destructive consequences of tariffs are becoming increasingly apparent, and calls from all sides to uphold free trade are growing ever stronger,” Mr Li added.

Analysts largely agree that China’s massive trade surplus and its unwillingness to shift away from an export-driven economy are directly fuelling the rise of global tariffs.

However, they see little incentive for Beijing to change course, despite growing international pressure.

“Demand from China’s mega-sized market will be unleashed at a faster pace” over the next five years, Mr Li said according to a read-out of the meeting, although world leaders’ patience appears to be wearing thin.

French President Emmanuel Macron said on Dec 7 that he had threatened Beijing with tariffs during his state visit last week, which coincided with the European Commission unveiling plans to boost Europe’s resilience to threats such as rare earth shortages and dumped imports.

Economists argue that while US President Donald Trump’s decision to hike tariffs on Chinese goods was hugely disruptive for global trade, Beijing’s reluctance to reform leaves the West with few alternatives.

“China is not taking any action, and I think has no intention to do so,” said Ms Alicia Garcia-Herrero, senior fellow at the think-tank Bruegel. “I don’t see China caring about all of these (visiting) officials whatsoever.”

“Its export-driven model is going to contribute around 40 per cent of global growth in 2025. I don’t think it has ever been higher, and China is supposedly growing, so there is no reason for such a big contribution to external demand,” she added.

Dec 8’s trade data indicated that China’s push to diversify its exports since Mr Trump’s November 2024 US presidential election victory is bearing fruit, with a surge in shipments to Europe, Australia, and South-east Asia.

“US import tariffs have diverted Chinese exports to other destinations, exacerbating competitive pressures in many parts of the world,” said Mr Fred Neumann, chief economist for the Asia-Pacific at HSBC.

“This is a reminder that tariffs can distort trade flows but, in themselves, don’t address fundamental macro-imbalances.”

‘The pressure is mounting’

China insists it is committed to reducing reliance on a credit-driven manufacturing sector and exports, with top leaders on Dec 8 pledging more measures to stimulate domestic demand.

But analysts say signals from important meetings of the ruling Communist Party indicate policymakers are reluctant to let go of their “all about production” economic playbook.

“So far there are no real signs that I can see that Trump’s go-it-alone tariffs have tamed China’s export juggernaut,” Mr Brad Setser, a former US trade official now with the think-tank Council on Foreign Relations, wrote on X following the trade data release.

HSBC’s Mr Neumann said an uptick in domestic demand would go a long way to reducing pressure on global trade, but that this was unlikely in the near-term unless officials adopted substantial policy easing.

He warned that economies squeezed by the US-China tariff war might simply give in to protectionist pressures and impose additional trade barriers to shield their exporters if Beijing does not take action to boost domestic demand.

But with growth on track to hit about 5 per cent in 2025, policymakers are expected to avoid new stimulus, preferring instead to boost infrastructure spending.

“I think countries are starting to think ‘what instruments do we have to stop this?’” said Ms Garcia-Herrero.

“It’s quite clear this is why everyone is knocking at China’s door,” she added, referring to recent visits by Mr Macron, Spain’s King Felipe and Germany’s finance and foreign ministers, among others.

“The pressure is mounting, and China is not ready to respond.” REUTERS