China's Export Ambitions Could Land Us In 'Global Trade War' Territory, Warns Economist

The Chinese government’s pivot towards a more export-focused growth model could potentially trigger a new global trade war, according to a prominent economist.

What Happened: Leland Miller, CEO of China Beige Book, has cautioned that China’s shift towards a more export-driven economic strategy could lead to a confrontation with other major global economies, Business Insider reported on Thursday.

This change in strategy, which places a heavier emphasis on manufacturing, is expected to increase Chinese exports substantially.

“That’s going to cause a lot of problems globally, politically. That’s why I think we’re going to be entering into a trade war next year. Because the Chinese economic growth model is not sustainable considering the political sensitivities of the rest of the world,” Miller cautioned.

China is responding to its economic challenges by injecting more credit into the manufacturing sector. This aim is to reduce its reliance on the real estate industry, which currently accounts for a quarter of its GDP. The recent wave of defaults in this sector has raised concerns about the future of China’s economy.

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Despite calls for China to implement substantial stimulus measures, Miller argues that the country focuses on strengthening its national security, building a domestic chip ecosystem, and consolidating its advanced manufacturing sector.

Why It Matters: China’s economic strategy has been a topic of global interest, particularly following the ambitious growth target set by Chinese Premier Li Qiang for 2024. This target, announced during the annual meeting of the National People’s Congress, reflects China’s emphasis on growth over reforms despite the nation’s deep structural imbalances.

The announcement of China’s economic objectives for 2024 has also had a notable impact on equity indices tracking Chinese stocks. While domestic Chinese stocks have shown signs of optimism, offshore Chinese equities, accessible to foreign investors, have experienced a decline.

These developments have led prominent economist Mohamed El-Erian to advise investors to approach China cautiously, suggesting that the country’s economic future is uncertain and may not be a safe long-term investment.

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