INSUBCONTINENT EXCLUSIVE:
Editor's note: The article is written by Zhang Bin, a senior researcher at the China Finance 40 Forum (CF40) and deputy director of the
Institute of World Economics and Politics, Chinese Academy of Social Sciences
The article was first published on the CF40 official website and reflects the author's opinions and not necessarily the views of CGTN
It has been translated from Chinese and edited for brevity and clarity. The tariff shocks initiated by US President Donald Trump have far
exceeded market expectations and posed a daunting challenge to the global economy
What concerns the market is not just tariffs of such scale but also the disruption of the global trade order and the heightened uncertainty
that lies ahead.As a major global trading nation, China has no choice but to confront the challenges brought about by Trump's tariff policy
Comparatively, most Chinese and international investors remain relatively optimistic about the Chinese economy and its capital markets.This
optimism about the Chinese economy and its capital markets is grounded in the following key factors.Firstly, the economic fundamentals are
Over decades, China's economy has made remarkable progress across various industries and sectors, which is attributable to robust market
competition, economies of scale, and the diligence and hard work of Chinese workers
In addition to the new technologies and industries that everybody knows, such as new energy vehicles, DeepSeek, and robotics, there has been
a steady stream of new-generation agricultural products in the agricultural sector
Meanwhile, in the service field, organizational, management, and operational innovations are consistently enhancing consumer experience in
Among the world's major economies, China remains one of the fastest in terms of industrial innovation.The Chinese economy has been
recovering from a period of sluggish demand with renewed vitality
Since last September, the Chinese government has stepped up countercyclical policy efforts, and there have been marked improvements in
corporate, government, and household cash flows, as well as a rebound in capital market valuations.According to the 2025 Government Work
Report released during the annual two sessions in March, the deficit-to-GDP ratio has been raised to four percent, alongside a significant
expansion in government debt and spending
With these countercyclical policy measures, government spending will provide stronger support for boosting aggregate demand and further
invigorating the economy. Secondly, the fundamentals of medium and long-term policy environments are favorable
China's domestic policy landscape remains relatively stable compared with the highly uncertain external environment
Market-based reforms and opening up have been the bedrock of the country's tremendous economic and social development, widely embraced
across society and constantly upheld as a policy orientation by the Chinese government.As new sectors and innovations emerge, China's
regulatory policies still have deficiencies and areas for refinement, but the country's commitment to opening-up and policy orientation of
market-based reforms remain unshakable
In recent years, key government economic meetings have consistently emphasized improving the institutional environment, particularly the
protection of private enterprises, further enhancing the market economy system and advancing high-level opening-up.Thirdly, China has ample
policy space to counter tariff shocks initiated by Trump
To begin with, China has sufficient room to stimulate domestic demand through policy introduction to offset weakening external demand
The country's low inflation means that China can rely on both fiscal and monetary policy tools to expand domestic demand without worrying
In contrast, developed countries are generally plagued by elevated inflation levels, leaving them with limited policy space to expand
domestic demand due to the dilemma of stagflation.Furthermore, apart from the broad-based policy of expanding domestic demand, China also
possesses a diverse range of targeted policy tools to help specific industries and import-export companies navigate the challenges
After the tariff shocks in 2018, both Chinese enterprises and the government have accumulated practical experience in dealing with such
This allows China to respond with greater composure in this new round of tariff shocks.Moreover, China now approaches the negotiations with
the US with greater confidence
This stems not only from its economic strength but also from the deep reliance of the global economy, the US included, on the Chinese
economy since its reform and opening-up
As a result, China is not in a disadvantaged position at the negotiation table, which lays the foundation for more favorable outcomes in
tariff-related negotiations between the two countries.Fourthly, the capital market valuations are more attractive
Following prolonged rallies in the US and Japanese stock markets, valuations of many stocks have reached historical highs, raising concerns
In contrast, the overall price-to-earnings ratios in the Chinese stock market remain low, so for investors, the risk of asset bubbles is
lower in China.The Trump administration's stronger-than-expected tariff measures are unprecedented in the modern era and will damage both
the world and the US itself
The full extent of their ripple effects remains uncertain, and the bottom for the US economy and capital markets is difficult to
determine. In comparison, China's countermeasures have been to stabilize domestic demand and economic fundamentals, help affected
industries and enterprises navigate the challenges, and steadfastly uphold an open and cooperative global trade order
By resolutely following a sound philosophy of development, the Chinese economy is well-positioned for greater certainty and a more promising
future in an increasingly challenging international environment.
