Daniel H. Rosen, Reva Goujon, and Logan Wright
The China that President-elect Donald Trump will face in 2025 is fundamentally different than the one he encountered when his first administration began in 2017, or even the one with which he negotiated a trade deal near the end of his term. Now, for the first time in more than four decades, China’s share of the world economy is shrinking—it peaked at just above 18 percent of global GDP in 2021 and stands at around 16 percent today.
China’s growth has slowed significantly since the property sector collapsed in 2021 and COVID-related restrictions impeded all types of economic activity in 2022. Domestic demand and household consumption made only a limited rebound after those restrictions were lifted at the end of 2022. Official Chinese GDP growth rates showed just a minor blip, but rising trade imbalances and falling domestic prices tell a grimmer story. China remains an investment-led economy: it is the world’s largest source of investment (around 28 percent) and gross manufacturing output (35 percent), but it represents only around 12 percent of global consumption. China’s domestic economy cannot generate nearly enough demand to absorb everything China produces. To create growth, therefore, Beijing has come to rely even more on exports of excess industrial output that cannot be absorbed in the domestic market. But China can only make further relative gains if other countries reduce their manufacturing investment or if Beijing expands its share of global exports.
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