China prepared for external shocks: Premier strikes upbeat note amid trade war

By The Straits Times | Created at 2025-03-23 09:09:50 | Updated at 2025-04-04 05:50:20 1 week ago

BEIJING – China is prepared to deal with potential external shocks and will roll out new stimulus measures if needed, Premier Li Qiang told a forum of global business leaders and scholars, in a pitch to keep them engaged in the Chinese economy amid a trade war with the US.

Speaking on March 23 at the opening of the China Development Forum, a high-level engagement platform for top global business leaders and senior Chinese policymakers, he said: “We are prepared for potential shocks that go beyond our expectation and are mainly external.”

Although he did not mention the United States, it was evident that he was referring US President Donald Trump’s threat to slap even more tariffs on China. Washington doubled duties on Chinese imports to 20 per cent on March 4, prompting Beijing to retaliate with additional tariffs of 10 to 15 per cent on selected US imports. Washington is expected to announce more tariffs around April 2.

Trade tensions have affected investor sentiments. In 2024, China suffered the largest capital flight since the 1990s. Data by the State Administration of Foreign Exchange in February showed that net foreign direct investment (FDI) dropped by US$168 billion (S$224 billion) in 2024.

FDI inflows in 2024 plummeted 99 per cent over the past three years, falling to US$4.5 billion in 2024 from a historical high of US$344.1 billion in 2021.

Eager to entice foreign investors, Mr Li struck an upbeat note about the Chinese economy in his speech to the 80 global business leaders gathered at Diaoyutai State Guesthouse in Beijing on March 23.

He stressed that the Chinese economy remains vibrant, with growth spots in consumption as shown by the box-office success of Ne Zha 2 – the screening of the animated movie has been extended on the Chinese mainland to April 30 – and a 20 per cent growth in tourism revenue in the past winter.

“Any product or service, once multiplied by 1.4 billion, is bound to be a big business, a big deal, a big market,” he said, referring to the Chinese population.

He outlined the plans China has announced in the past weeks to stabilise its economy and encourage consumption, such as adopting a proactive fiscal policy and a looser monetary policy, and expanding trade-in subsidies for consumer products.

China has made boosting consumption a top priority in 2025. Economic data, however, showed that deflationary pressures remain high, as people who worry about maintaining or growing their income and wealth hesitate to spend.

Mr Li highlighted China’s achievement in technological innovation as a potential area for new investment. “Chinese robots could start mass production in 2025,” he said, citing orders in January and February.

The green economy is another bright spot, he noted.

Mr Li also urged the forum participants to join Beijing to oppose protectionism.

“I sincerely hope all entrepreneurs can make concerted efforts and cooperate in good faith to resist unilateralism and protectionism,” he added, in another veiled reference to Mr Trump’s threats to levy tariffs on America’s trade partners.

Among the audience is pro-Trump US Senator Steve Daines, who is the first US politician to meet top Chinese officials in person since Mr Trump returned to power in January. When he met Vice-Premier He Lifeng on March 22, the latter told him that Beijing is opposed to the “weaponisation” of economic and trade issues.

Business leaders and scholars at the forum echoed Mr Li’s optimism.

Swiss pharmaceutical giant Novartis chief executive Vasant Narasimhan told The Straits Times that Mr Li’s speech shows the confidence China has for its long-term growth. “Novartis has been here for over 100 years and we continue to invest and will be here for the long run.”

Nobel laureate Myron Scholes, an economics professor at Stanford University, told ST that China’s moves to boost consumption and green technology are in the right direction. “How fast will it go? We’ll see.”