China’s Economic and Geopolitical Strategy Amid US Instability

Xi Jinping warned that “the world is undergoing changes which have not been seen in a hundred years.” He attributes much of the sudden shift to Donald Trump’s actions, which he says have turned the United States into a “force for instability.” That instability, in turn, lets China present itself as “the adults in the room,” especially as the U.S. becomes entangled in the Middle East and the existing order appears increasingly U.S.-dominated.

The United States as an Instability Factor

The brief argues that U.S. actions create openings for China. When the United States appears unreliable or distracted, Beijing can step forward with economic offers and diplomatic overtures, positioning itself as a stable alternative to a chaotic partner.

US‑China Relationship Dynamics

The bilateral relationship is described as the most important of the century. Trump is portrayed as brash, impulsive, and often “transactional, pragmatic, and unpredictable,” while Xi is depicted as guarded, methodical, and playing the long game. Chinese netizens have coined nicknames for Trump such as “TACO” (“Trump Always Chickens Out”) and “Chuan Jian Guo” (“Trump, the Nation Builder”), reflecting a view that many of his threats are forgotten or unexecuted.

China’s Trade and Economic Strategy

Trump’s first trade war revealed China’s vulnerability to U.S. demand, prompting a deliberate diversification away from the American market. Exports to the United States fell about 20 % last year, yet China posted a record trade surplus of $1.2 trillion. In response, Beijing imposed tariffs of 125 % on U.S. goods and expanded exports to other regions: India (+12.8 %), Southeast Asia (+13.5 %), and the EU (+8.4 %).

A central pillar of the strategy is control over rare‑earth minerals and magnets. China mines over 60 % of the world’s rare earths and refines more than 90 %, while other countries have largely abandoned production. Export controls now cover seven types of rare earths, which are essential for iPhones, electric vehicles, fighter jets, and missiles. By leveraging low labor costs and lax environmental standards, China can inflict economic pain on U.S. manufacturers and global producers.

China’s Economic Challenges

Beijing set a GDP growth target of 4.5 %–5 % for the year, the lowest since 1991. The economy faces overcapacity in steel, empty “ghost towns,” and a deflation problem tied to that overcapacity. Fixed‑asset investment declined for the first time on record, making exports the primary engine of growth. Workers are experiencing pay cuts, job losses, and difficulty finding employment. To manage domestic excess, China is effectively “exporting deflation,” selling surplus goods at low prices to Southeast Asia, Latin America, and Europe.

Geopolitical Stance and Global Role

Western leaders are visiting Beijing, but China remains cautious about military entanglements. It provides economic lifelines to Iran (13‑14 % of China’s oil imports) and Venezuela (4 %), yet these partners are not strategically essential. A closure of the Strait of Hormuz would threaten nearly half of China’s oil supply, underscoring the importance of secure trade routes. China’s focus stays on the trade war, where it holds clear advantages, while acknowledging it is not yet an equal to the United States.

Future Outlook: Hedging as a Strategy

For nations caught between the two superpowers, “hedging will be the key word for 2026 or 2027.” By diversifying relationships and building resilience, countries can avoid being forced to choose sides and mitigate disruptions from either the United States or China.