The prevailing narrative surrounding China’s economy is one of impending doom. We hear tales of a failing real estate sector, widespread unemployment, and a debt crisis that dwarfs even that of the United States. While these issues are indeed a reality for everyday Chinese citizens, they paint an incomplete picture. The Chinese Communist Party (CCP) is adept at manipulating this narrative to further its own mercantilist agenda.
China’s economic strategy accepting the fact that deflation and lower wages would assist in countering Trumps first set of tarriffs in order to maximize exports around 2022. While the COVID-19 pandemic initially disrupted economic activity, the CCP seemingly chose to exploit the sluggish post-COVID domestic demand recovery by allowing economic hardship to persist. This ensures a steady supply of cheap labor, further boosting China’s export capabilities.
While Main Street China suffers, the CCP, or what I call “Wall Street China,” thrives. The government’s control over the economy allows it to manage debt, accumulate dollar reserves, and prioritize its own financial interests. The goal is clear: amass wealth and power on the global stage.
This strategy has yielded significant results. China’s trade surplus is approaching over $1 trillion in 2024, and its currency reserves are estimated to be between $6 trillion and $10 trillion. These resources are being used to forge alliances and expand China’s influence, countering the institutions of the West. As long as China is a Mercantilist, its plan to be a world superpower is intact.
An example of China’s manipulation: China only reported $3.2 trillion in currency reserves in May of 2024, which is the same as the currency reserve in 2015. This underreporting doesn’t include nine years of massive trade surpluses, which, even with rough calculations, place another $6 trillion in currency reserves. The fact is that in 2024, that currency reserve will grow by another $900 billion.
The United States must recognize this manipulation, everything China pushes is a narrative, from crisis to reserves. We cannot allow ourselves to be swayed by the narrative of a collapsing China. The CCP is exploiting its own people to achieve its economic and geopolitical goals. Domestic China is factually in crisis; however it is for the advancement of exports.
Even around the time this plan was enacted in 2022, the Yuan to Dollar exchange rate was 6.25 to 1, and today it is 7.15 to 1. They lowered their currency by 13%, which would offset a large part of the Trump tariffs imposed during the previous administration’s first term. The economic slow down, wage decreases and deflation would offset the full effect of those tariffs, which were about 20% on $200 billion worth of goods. In fact, for the tariffs to be truly effective, they would need to be over 50%, and even then, China could further devalue its currency.
If the CCP were not exploiting the workers, it would have launched a large stimulus in 2022, which it did not. It needs wages to remain low, as they have increased multi-fold since 1980. This has caused China’s average factory salary to be higher than Brazil, Argentina, Mexico, Indonesia, Malaysia, and many other countries. Even the stimulus announced in October 2024, did not seem to move the needle, the reason was it was to prop up the stock market world wide with the goal to help Harris to become the next President, when that failed China has slowed down the release of the stimulus. Reuters even reported that it “falls short of expectations”. Does this mean it was designed to appear like stimulus, to cover up the fact China wants to suppress wages and create deflation to lower prices. Now that Harris is not going to be the next President, China is holding back the stimulus announced in October, and will use this at the needed time to counter Tariffs.
The true threat lies in its economic dominance. As long as China maintains a massive trade surplus with the World, it will be able to prepare its own monetary system to counter SWIFT and US based monetary control, and it will be able to fund and gain support for its own institutions with its strong trading partners and undermine the United States.
For those who sympathize with China or deny the fact they want to dominate the world and will lie about the data to do that, consider the following: China’s annual trade surplus has ballooned in recent years:
- 2019: $415 billion
- 2020: $518 billion
- 2021: $676 billion
- 2022: $877 billion
- 2023: $823 billion
- 2024: $1,060 billion (over $1 trillion)
Does this look like China had a crisis in 2023 and 2024? The numbers paint a very different picture. It appears the reason the Chinese waited two years to announce a stimulus is because they realized falling prices in the domestic market made export products less expensive.
Another indicator of economic growth and a sign that China’s reported crisis is a lie is the country’s iron ore imports by year. The iron ore imports were:
- 2017 – 1.075 billion tons
- 2018 – 1.064 billion tons
- 2019 – 1.069 billion tons
- 2020 – 1.170 billion tons
- 2021 – 1.120 billion tons
- 2022 – 1.106 billion tons
- 2023 – 1.18 billion tons
- 2024 – 1.2 billion tons (expected)
If China’s economy were slowing down, there is no indication of this based on one of their largest imports. I would expect at least a 5% dip in iron ore imports, but there is no decline. In fact, they are reporting a 5.2% year-over-year increase.domestic wages were beneficial for exports.
This trade surplus and false narratives reflects China’s strategic mercantilism, designed to accumulate wealth and dominate global markets and then dominate the world. While this creates an economic crisis for other countries, China had greatly benefited from a depressed Chinese Mainstreet, able to undercut the competitors and be a more competitative exporter.
How is this trade surplus even possible if China is declining? Well, first, they are not declining. Second, they have purposefully manipulated their currency from a 6.13 to 1 dollar ratio 10 years ago to 7.30 today, weakening it over time to make exports more valuable. This is a 19% change. However, coupled with the 8.4% deflation of goods over the last six quarters, this is not a sign of an economic crisis in China. Rather, it is a sign that the Chinese government wants to stimulate the economy by undercutting everyone. With a total 27.4% decline in the value of Chinese export goods over 10 years, most of it in the last three years, completely eliminates the affect of Trump’s first round of tariffs.
It is time for the United States to adopt a more strategic approach. We must address our trade imbalance with China by tariffing all products from China and to tariff products with Chinese components entering the USA from all countries in order to undermine China’s mercantilism design, support domestic manufacturing, and support imports from strategic partners to counter Chinese imports from those countries. Only then can we counter China’s manipulative mercantilism and ensure a more balanced global economic order.
