China has announced a barrage of measures meant to counter the blow to its economy from U.S. President Donald Trump’s trade war, as the two sides prepare for talks later this week.
Beijing’s central bank governor and other top financial officials outlined plans Wednesday to cut interest rates and reduce bank reserve requirements to help free up more funding for lending.
They also said the government would increase the amount of money available for factory upgrades and other innovation, and for elder care and other service businesses.
Trump’s tariffs, set as high as 145 per cent on imports from China, have begun to take a toll on the country’s export-dependent economy at a time when it’s already under pressure from a prolonged downturn in the property sector. China has retaliated with tariff hikes of up to 125 per cent on U.S. goods and stopped buying most American farm products.
Late Tuesday, China and the U.S. announced plans for talks between Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer and Chinese Vice-Premier He Lifeng later this week in Geneva, Switzerland.
U.S. Treasury Secretary Scott Bessent, speaking at an event hosted by the Institute of International Finance, says the ‘persistent overreliance’ on the U.S. for consumer demand is creating an ‘evermore unbalanced’ global economy, citing China’s export-heavy economy as an ‘unsustainable’ model.
The agreement to talk comes at a time when both sides have remained adamant, at least in public, about not compromising on the tariffs.
“The U.S. has recently expressed a desire to negotiate with China. This meeting is being held at the request of the U.S. side,” Foreign Ministry spokesperson Lin Jian told reporters in Beijing.
“Any form of pressure or coercion against China will not work,” Lin said. “China will firmly safeguard its legitimate interests and uphold international fairness and justice. Please stay tuned for the specific details of the dialogue.”
Both economies showing signs of strain
By easing credit, China’s leaders are providing a “policy buffer” for exporters as Beijing prepares for the talks, economists at ANZ Research said in a report.
“The authorities are prepared to have a protracted negotiation and hold a strong stance against protectionism,” the report said.
Chief political correspondent Rosemary Barton speaks with former U.S. labour secretary Robert Reich about a possible trade deal with China and whether President Donald Trump could pause auto tariffs to give carmakers more time to move to the U.S.
Both the U.S. and Chinese economies have been showing signs of strain, after a spurt of activity as companies and consumers rushed to beat the tariff hikes.
The meetings in Switzerland could offer an opportunity for both sides to dial down the current prohibitively high level of tariffs, which Bessent has described as unsustainable, while they work on a deal. But the process is likely to take time.
“A durable resolution remains elusive, in our view, given the wide scope of issues in the bilateral relationship,” Morgan Stanley said in a commentary.