In Beijing, Trump meets a China that still holds key economic cards

As Xi Jinping hosts Donald Trump today in Beijing, China - to use the Trumpian phrase - holds the cards, most of which are economic. China's economy has powered ahead during the US-Israel war against Iran. But global stress build-up could affect its prospects down the road. Going by latest trade data released last week, exports remained strong as Chinese factories fed the appetite for AI infra across the world.

Overseas buyers are rushing to secure supplies. Yet, prolonged energy disruption will weigh on China's export demand. Its trade surplus has widened as it drained its strategic oil reserves to maintain economic momentum. This has helped to stabilise global oil prices.

Once China resumes its oil imports, it will prop up oil prices for an extended period, contributing to weaker global demand. Beijing has not rolled out its entire range of fiscal measures to boost domestic consumption following last year's retaliatory US tariffs. The lingering property market weakness reduces China's ability to act as a growth driver if global economic activity falters.


The US economy has also weathered the West Asian conflict reasonably well, given the country's lower dependence on energy imports. But inflation will figure prominently in its negotiating stance because of US trade deficit. Trump must also work around the US Supreme Court strike-down of his emergency powers to impose tariffs. Xi can be expected to use China's stranglehold over rare earths to dial down US pressure over unfair business practices. US farm exports offer an easy fix to balance its trade with China, and progress is widely anticipated.

China's resilience to energy supply disruptions does not necessarily convert into a stronger bargaining position with the US. Lack of domestic consumption limits its ability to provide direction to the global economy that US imports do. It may be easier for the US economy to work on its trade deficit than for China to trim its surplus. Plus, the technology race is yet to be won. For now, expect peace in the 'chips vs magnets' war.