In his address to the Institute of International Finance on April 23, U.S. Treasury Secretary Scott Bessent claimed China's current economic model is built on exports, adding this is an unsustainable model. He said China needs to change and the United States wants to help it change.

Bessent's remarks only prove that the U.S. administration indeed has no real understanding of China's economic conditions.

Some interesting data: In 2018, China's exports to the U.S. accounted for 19.2 percent of the country's total exports, but following the first Donald Trump administration initiated the trade war, the proportion had declined to 14.7 percent by 2024.

However, China's GDP soared by 49.85 percent from 90.03 trillion yuan ($12 trillion) in 2018, to 134.91 trillion yuan ($18 trillion) in 2024. This means that the U.S.-initiated trade war against China has merely decreased the proportion of Sino-U.S. trade in China's total trade volume, but not really influenced the development of the Chinese economy.

So why haven't the U.S. containment efforts been successful in slowing down the Chinese economy?

U.S. officials are perhaps puzzled, hence Bessent's "we want to help it change" remark. His words are a telltale sign that he does not recognize China has already moved away from the model of relying on exports to boost growth.

China began transforming its economic growth structure and growth model more than a decade ago. The 11th Five-Year Plan (2006-10) approved by the Fourth Session of the 10th National People's Congress, the country's top legislature, in March 2006 proposed to accelerate the transformation of the economic growth model. China's economic growth structure has since gradually shifted from relying on investment and exports to being dominated by consumption and service industries, with the contribution of consumption to the GDP reaching over 60 percent in 2024. 

The country's economic growth model has shifted from one of high pollution and high energy consumption to a low-carbon and sustainable one, and from relying on low-end manufacturing to driven by high-end manufacturing (such as new energy and semiconductors) and services.

What's more, China ranked 11th in the World Intellectual Property Organization's 2024 Global Innovation Index, an annual ranking of countries based on gauges like their success and capacity in innovation, making it one of the fastest-growing economies in innovation capacity over the past decade.

Although foreign trade has played a lesser role in driving economic growth, China still maintains its position as the world's largest trading nation, with the U.S. becoming less important among its trading partners. Due to the "reciprocal tariffs" imposed by the latter, Sino-U.S. trade is now at a low point in decades. 

The U.S. trade war against China has not followed the direction American politicians originally expected to see. It has forced China to structurally reform its trade: Diversified foreign trade has become the new orientation.

Chinese exports to the U.S. are expected to fall by 77 percent in 2025, according to the World Trade Organization's forecasts. Meanwhile, imports from China are expected to increase in every other market, with the rest of North America predicted to see a 25-percent growth in Chinese imports, Germany-based global data platform Statista.com projected on April 17. 

South America is expected to see a 9-percent increase in Chinese imports this year, while all other markets are projected to see import increase 4 to 6 percent. 

China's current economic conditions suggest that while the "reciprocal tariffs" imposed by the U.S. may cause a decline or stagnation in the country's exports to the U.S., their overall impact on the Chinese economy and foreign trade is likely to remain manageable. BR 

Copyedited by Elsbeth van Paridon

Comments to lanxinzhen@cicgamericas.com