Xi Jinping’s solution for China’s economy risks triggering new trade war

As China’s property sector declines, leader Xi Jinping needs to reshape the nation’s economic model to drive growth over the next decade. His government’s solution risks igniting a new wave of trade tensions across the globe.

China’s leaders are pouring money into manufacturing as property-related activity, which once spurred about a fifth of the economy’s expansion, turned into a drag on growth in 2022. Part of that focus is what they call the “new three” growth drivers of electric vehicles, batteries and renewable energy, aiding the world’s decarbonization push and fueling demand for commodities such as copper and lithium.

So far, the strategy is helping China avoid the recessions that hit Japan in the 1990s and the United States in 2008 when their housing markets melted down: The world’s second-biggest economy is now growing at about 5% a year. Yet it’s also fueling imbalances that are setting the stage for renewed global trade tensions between China and the developed world, as well as emerging economies that are pushing to reach the lower rungs of the industrialization ladder.