The Mainland Affairs Council of the Republic of China recently held a consultative committee meeting with the theme “The Impact of Escalating US-China Strategic Competition on Mainland China’s Economy and Cross-Strait Economic and Trade Relations.” The consultative committee pointed out that the shift of US-China competition to a “strategic decoupling” poses a substantial challenge to the mainland China’s economy, with mainland residents feeling pessimistic about the future economic and employment prospects, leading to sustained low consumer confidence.
The Mainland Affairs Council of the Republic of China released a press release stating that in a recent meeting of the 68th consultative committee, scholars pointed out that mainland China is facing pressure to transform its export structure. In recent years, the proportion of exports to the US in mainland China’s total exports has decreased from 19.3% in 2018 to around 14.7% in 2024. Although mainland China has been attempting to expand into markets such as ASEAN, the Middle East, and Latin America, emerging markets face limitations in terms of market size, regulatory systems, and political stability compared to the US and Europe.
Scholars emphasized that the US-China economic and trade frictions have evolved from “tactical pressure” to “strategic decoupling,” posing a substantial challenge to the structural makeup and growth model of mainland China’s economy.
Some committee members expressed concerns about the continued low inflation in mainland China in April, indicating that the deflation issue remains unresolved. Despite the People’s Bank of China announcing a package of loose monetary policy measures on May 7, including a 0.5 percentage point reduction in reserve requirements and a 0.1 percentage point interest rate cut, if the monetary easing policy fails to transmit effectively due to pessimistic expectations among enterprises and consumers, market funds may struggle to translate into real investments.
According to some members’ analysis, mainland China recently implemented a stimulus program for exchanging old consumer goods for new, attempting to boost demand for consumer goods, automobiles, and home appliances among the populace to stimulate domestic consumption. While this may bring short-term stimulating effects, its long-term sustainability is limited. Reasons for weak consumption include inadequate government social welfare coverage, low pension levels for the populace, limited income growth, the negative wealth effect from the falling property market, and pessimism about future economic and job prospects, all contributing to sustained low consumer confidence.
Some members observed, based on research reports from organizations like Bloomberg Intelligence and the European Chamber of Commerce in China, that mainland China has made progress in industries such as advanced rail transportation equipment, energy-efficient and new energy vehicles, and power equipment under the “Made in China 2025” initiative. However, challenges remain in key core technologies such as advanced manufacturing processes, EUV equipment, and EDA software, due to international blockades and difficulties in investment transformation.
Some members believe that despite the joint release of the “US-China Joint Statement on Economic and Trade Talks in Geneva” on May 12, reaching a 90-day tariff ceasefire agreement, the US demands comprehensive market opening from mainland China. However, due to considerations regarding social control and other aspects, the possibility of full market opening in financial services, digital technology, and the telecommunications industry is low for mainland China, limiting bilateral concessions and compromise space, potentially leading to stalled economic and trade negotiations in the future.
Some members pointed out that actual foreign direct investment (FDI) in mainland China showed a year-on-year decreasing trend from 2023 to 2025. Despite recent meetings between Xi Jinping and foreign business representatives as well as the passing of the “Private Economy Promotion Law” aimed at strengthening foreign investment protection, external doubts still persist regarding the execution effectiveness of CCP policies and the rule of law and policy transparency.
Some members suggested that as structural deepening of US-China competition influences global supply chains and geopolitical economic restructuring, mainland China’s trade with ASEAN, Russia, and other countries has increased while direct trade with European and American countries has decreased. In addition to considering production costs and market opportunities, Taiwanese businesses should focus on enhancing supply chain resilience and diversifying layouts to address global political and economic risks and challenges of supply chain disruptions.