Welcome to the 243rd edition of Trade War.
China’s statistics bureau says GDP grew 5% in 2024, meeting official target, but outside economists question data. Export-driven growth likely to stall this year in face of tariffs, warn Morgan Stanley and other investment banks. And Rhodium Group estimates last year’s real rise was no more than 2.8%.
After Trump talks to Xi on Friday about trade, tariffs and TikTok, the incoming US president declares their conversation “very good.” And Treasury nominee Scott Bessent accuses China of having the “most imbalanced economy in the history of the world.”
TikTok refugees flee to China’s Xiaohongshu, now also known as RedNote, in protest against imminent ban. And China announces it now holds 16.5% of world’s lithium reserves, ahead of Australia and second only to Chile.
Notable/In depth
Unlike Canada and Mexico, China likely to hit back on US tariffs, magnifying the pain for both countries
“[Excess capacity is] a byproduct of Beijing’s long-term push to dominate manufacturing at every level of the value chain,” write GMF experts
“People in China do not feel confident about the future and therefore they are not opening their wallets and they are not spending” says Trade War founder Dexter Roberts speaking to KALA Radio
I went on a local NBC affiliate and talked about China’s ban on critical minerals, the US-China advanced semiconductors rivalry, Taiwan Strait tensions, and Beijing’s global use of economic coercion.
Watch the whole interview here and watch a shorter news clip here looking at the US search for critical mineral reserves.
GDP outperforms at 5% but is it real?
China’s statistics bureau announced GDP grew 5 percent in 2024, meeting the official target, but some outside economists are questioning the data.
Beijing put fourth quarter growth at 5.4 percent, supported by strong exports and investment. Industrial production was up 5.8 percent, faster than retail sales that grew 3.5 percent. Investment rose by 3.2 percent last year, compared to 3.0 percent in 2023.
“The robust headline numbers contrast with a variety of other data points that paint a weaker picture of economic health, including anemic consumer inflation, tax revenue and online spending. The economy remains mired in a real-estate slump and has been struggling with deflation,” reports the Wall Street Journal.
“These growth figures stretch the bounds of credibility and will do little to build confidence or alter the picture of an economy that is on the ropes,” says Eswar Prasad, a professor of trade policy and economics at Cornell University and former head of the International Monetary Fund’s China division.
“A better read of the economy is provided by flailing stock markets, continued turmoil in the property sector, a depreciating currency, and capital outflows. These indicators are hardly consistent with an economy hitting the growth target on the nose.”
Meanwhile, Gao Shanwen, the chief economist at Chinese state-owned financial firm SDIC Securities, has been forbidden from speaking publicly, after he questioned China’s official statistics at a public forum in Washington DC in December.
“We do not know the true number of China’s real growth figure,” Gao said on December 12 at the forum hosted by the Peterson Institute for International Economics. “My own speculation is that in the past two to three years, the real [gross domestic product growth] number on average might be around 2 percent even though the official number is close to 5 percent.”
Growth likely “transitory,” says Morgan Stanley
Growth likely to be “transitory” and stall this year with global trade tensions, says Morgan Stanley, joining a host of investment banks sounding warnings about the China economy.
Here is the litany of pessimism:
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