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China Considers Weaker Currency to Combat US Tariff Risks 

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China’s top leaders and policymakers are considering allowing the yuan to weaken in 2025, anticipating higher U.S. trade tariffs as Donald Trump returns to the White House. The contemplated move reflects China’s need for a larger economic stimulus to counter Trump’s threats of punitive trade measures, according to sources familiar with the matter. Trump has announced plans to impose a “10% universal import tariff” and a “60% tariff on Chinese imports into the United States.”

Allowing the yuan to depreciate could make Chinese exports cheaper, mitigating the impact of tariffs and creating looser monetary settings in mainland China. This strategy is not new; China has a history of competitive devaluation to offset tariff impacts. In 2019, the U.S. Department of the Treasury labeled the country a “currency manipulator.”

Financial News, the PBOC’s (People’s Bank of China) publication, released an article stating that the foundation for a “basically stable” yuan exchange rate remains “solid,” and the yuan is likely to stabilize and strengthen towards the end of this year. Allowing the yuan to depreciate next year would deviate from the usual practice of maintaining a stable foreign exchange rate, according to the sources. 

While the central bank is unlikely to state it will no longer uphold the currency, it will emphasize giving markets more power in deciding the yuan’s value, one source said. 

During Trump’s first term, the yuan weakened more than 12% against the dollar amid tit-for-tat tariff announcements between March 2018 and May 2020. A weaker yuan could help China’s economy achieve its challenging 5% growth target and relieve deflationary pressures by boosting export earnings and making imported goods more expensive.

“To be fair, it is a policy option. Currency adjustments are on the table as a tool to mitigate the effects of tariffs,” said economist Fred Neumann. However, he cautioned that aggressive currency devaluation could lead to a “tariff cascade” as other nations impose import restrictions on Chinese goods in response.

Analysts forecast the yuan to fall to 7.37 per dollar by the end of next year, though much depends on the extent and speed of Trump’s tariff increases. The currency has lost nearly 4% of its value against the dollar since the end of September as investors prepare for a Trump presidency.

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Russian official Medvedev visits China

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Dimitry Medvedev, a senior Russian security official, arrived in Beijing for a two-day visit to engage in discussions with Chinese leaders, Russian news agencies reported late Tuesday.

Medvedev, who serves as the deputy chairman of Russia’s influential Security Council, is visiting as part of the growing relationship between Moscow and Beijing. Both nations have committed to strengthening their “no limits” partnership, which was declared in February 2022, shortly before Russia’s full-scale invasion of Ukraine.

In October, Russian Defense Minister Andrei Belousov also visited Beijing. Both parties described his meetings as focusing on “substantive” defense and military discussions aimed at enhancing bilateral ties.

Medvedev, a former Russian president, has become one of the most outspoken defenders of Moscow’s actions in Ukraine. Last month, he cautioned the United States to take President Vladimir Putin’s adjustment to Russia’s military doctrine seriously, given Ukraine’s use of Western missiles to target sites within Russian territory.

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New Challenges for China’s Economy Amid Rising U.S. Tariffs

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China, the world’s second-largest economy, is facing new challenges. Weeks before the Trump administration returns to the White House and implements new trade tariffs, Chinese exports grew at a slower pace in November than in the previous month, while imports also fell.

Outbound shipments grew by just 6.7% last month, below the 8.5% increase expected by economists and down from 12.7% in October. More worryingly, imports dropped by 3.9%, the worst performance in nine months and far worse than the expected 0.3% rise. This has fueled calls for more government action to support domestic demand.

Donald Trump, the US President-elect, announced on November 26 that he would impose an additional 10% tariff on products imported from China because Beijing had not fulfilled its promise to severely punish anyone who facilitated the smuggling of fentanyl and drugs from China into the United States through Mexico. Trump has also said he might impose tariffs of over 60% on Chinese goods.

China is also facing the threat of opening a second front in the trade war due to the 45.3% tariffs imposed by the European Union on Chinese-made electric cars.

Xu Tianchen, senior economist at the Economist Intelligence Unit, stated, that  “Early signs of trade frontloading in anticipation of Trump’s tariffs next year have started to emerge, but the full impact will not be felt until the coming months, especially December and January“.

U.S. tariffs are becoming an even bigger challenge for China now compared to during Donald Trump’s first term. The Chinese economy, worth $19 trillion, relies heavily on exports, but with the ongoing property crisis hurting household and business confidence, exports are under pressure. While manufacturers reported better business conditions in November, indicating some effect from government stimulus, they also noted a drop in export orders.

This has led experts to urge China to move away from an over-reliance on manufacturing and exports. Some government advisors suggest maintaining a growth target of around 5% for next year, with more aggressive stimulus measures aimed at boosting domestic consumption to offset the impact of U.S. tariffs.

In response to these challenges, the central bank launched its largest monetary easing since the pandemic in September, cutting interest rates and injecting $140 billion into the economy. China also saw a drop in imports of commodities like vegetable oils and rare earths, though prices for some, like crude oil and copper, rose.

 Key policymakers are set to meet soon to discuss priorities for 2025, and investors are keen to see if Beijing will shift its focus towards strengthening the consumer sector, which could drive future growth. Economists expect imports to pick up in the coming months as fiscal policies are likely to stimulate demand for industrial commodities.

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Donald Trump named David Perdue as the next US ambassador to China

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The newly-elected president, Donald Trump, named past Georgia Senator David Perdue as the next US ambassador to China.

Chinese think tanks described Perdue’s work in Congress as „anti-China.” One of the ambassador’s main concerns was the strengthening of the U.S. Navy, partly caused by the constant development of Chinese military capabilities.  Apart from this, Perdue talked about China in his essay published in the Washington Examiner, saying that, for protection, “Americans first have to realize the CCP [Chinese Communist Party] actually is at war with us.”

It should be mentioned that his position toward China was not always this strict: at first since he was business-friendly, the former Senator advocated for the reduction of the Chinese trade deficit. Additionally, Perdue, as a businessman, was especially in favor of moving certain jobs from the U.S. to Asia to save on manufacturing costs. However, for a lot of people, such activities went against Trump’s America First policy, which aimed to bring job positions back to America.

On social media website TRUTH. Donald Trump wrote about the new position of Perdue and said that the work of the ambassador would play a crucial part in „implementing [his] strategy to maintain Peace in the region and a productive working relationship with China’s leaders.“ Despite this,  considering Perdue’s past work in Congress, Trump’s choice looks to be a more aggressive approach than Biden’s administration.

Politico writes on account of an anonymous source that Perdue is not perceived as a partner for China and he „will be lucky if he can see [Chinese Foreign Minister] Wang Yi. “ Chinese Foreign Ministry spokesperson has not commented on the subject but has „noted the report“ about the decision. 

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Trump appoints yet another China-hawk Peter Navarro as a senior counselor for trade and manufacturing

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US President-elect Donald Trump has appointed Peter Navarro, his former economic adviser who has been under Beijing’s sanctions since 2021, as senior counselor for trade and manufacturing for his upcoming term in the White House. At 75, Navarro will assist in the “successful advancement and communication of the Trump manufacturing, tariff, and trade agendas,” Trump announced on social media on Wednesday. 

Trump praised Navarro’s past performance, stating, “During my first term, few were more effective or tenacious than Peter in enforcing my two sacred rules, Buy American, Hire American.” He added that the new role would capitalize on Navarro’s “broad range of White House experience.”

During Trump’s first term, Peter Navarro held the position of director for the newly established White House National Trade Council. Known for his strong advocacy of protectionist trade policies, Navarro has consistently supported measures to shield American industries. He vigorously defended tariffs on $370 billion worth of Chinese imports in this role and pushed for national security tariffs on aluminum and steel.

Peter Navarro was a key architect of America’s trade war with China and was among the 28 senior officials sanctioned by Beijing the day after President Joe Biden took office in January 2021.  At the time, the Chinese foreign ministry stated that Navarro and the other sanctioned Americans “seriously violated China’s sovereignty and are primarily responsible for China-related issues.”

Those sanctioned were barred from entering Chinese territory, including Hong Kong, and companies affiliated with them were to face business restrictions in China. Navarro’s appointment marks him as the second member of Trump’s new administration to be sanctioned by Beijing.

He joins Marco Rubio, a US senator from Florida and a known China hawk who has been sanctioned twice by Beijing. Rubio, selected by Trump as the next secretary of state, is currently awaiting confirmation by the US Senate. Additionally, Trump has already appointed cabinet secretaries and a national security adviser who have expressed a strong stance on confronting China.

Peter Navarro is among those American politicians who blame China for the spread of the coronavirus. In an interview given to CNBC, Peter Navarro said that Beijing has not taken measures to limit the travel of infected citizens abroad.

“They banned flights from Wuhan to Beijing and Shanghai, but at the same time allowed flights to Milan and New York. Hundreds of thousands of Chinese spread the virus widely, creating a prerequisite for the spread of the pandemic. China has caused serious damage to the world and China will have to pay the price.”- said Navarro.

Navarro, a Harvard-educated economist, rose to prominence with his 2011 book “Death by China,” in which he accused China of currency manipulation and intentionally harming Americans with dangerous consumer goods.

In his book, Navarro proposed measures to counter these actions, such as preventing Beijing from pressuring American companies to transfer technology to their Chinese partners. Many of Navarro’s recommendations were later adopted by the Trump administration.

In a critical article by MSNBC, it is highlighted that Navarro’s return signals Trump is as serious as ever about pursuing an aggressive tariff strategy, unraveling free trade norms and agreements, and potentially escalating trade wars with China. 

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China Bans Key Mineral Exports to U.S., Escalating Trade Tensions

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On Tuesday, 3rd of December, China banned the export of key minerals—gallium, germanium, and antimony—to the United States. These minerals are essential for military and tech applications, and the move is a significant escalation in the ongoing trade tensions between the two countries. This comes just a day after the U.S. imposed new restrictions on China’s semiconductor industry.

China has been gradually tightening controls on critical mineral exports, but this new ban targets only the U.S. The Chinese Commerce Ministry cited national security concerns and said that the export of these minerals to the U.S. would no longer be allowed. Gallium and germanium are important for semiconductors and infrared technologies, while antimony is used in weapons and ammunition. Graphite, which is also affected by the new rules, is a key component in electric vehicle batteries.

“To safeguard national security interests and fulfill international obligations such as non-proliferation, China has decided to strengthen export controls on relevant dual-use items to the United States,” the ministry said.

The U.S. government is reviewing the situation and says it will take appropriate action. A White House spokesperson emphasized the importance of diversifying supply chains to reduce reliance on China.

Data shows that, so far, no germanium or gallium has been shipped to the U.S. this year, although these minerals were once major exports. China’s shipments of antimony also dropped sharply in October after the export restrictions were announced.

The move is seen as part of China’s strategy to protect its military and technological interests. Some U.S. companies have warned that China is “weaponizing” access to critical minerals. Perpetua Resources, a company developing an antimony mine in Idaho, said the U.S. needs to reduce its dependence on Chinese minerals.

The timing of China’s export ban is notable, as it follows the U.S.’s third crackdown on China’s semiconductor industry. The trade war between the two countries continues to intensify, with both sides imposing tariffs and restrictions. 

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Baerbock Confronts China Over Support for Russia in Ukraine Conflict

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German Foreign Minister Annalena Baerbock has sharply criticized China for providing economic and military support to Russia in its ongoing war against Ukraine, warning that Beijing’s actions are threatening peace in both Europe and the Indo-Pacific. In a statement ahead of her visit to Beijing next week, Baerbock accused China of undermining global security by opposing core European interests through its backing of Russia.

“Instead of taking responsibility for peace and security in the world as a permanent member of the U.N. Security Council, China is opposing our core European interests with its economic and weapons aid to Russia,” Baerbock said. The minister is scheduled to meet with her Chinese counterpart, Wang Yi, to discuss a range of issues, including the war in Ukraine.  

Baerbock emphasized that Russia’s invasion of Ukraine is not only a direct threat to European peace but also has global ramifications. She noted that the war shows how European security is closely tied to security in Asia, particularly when North Korea sends soldiers and weapons to support Russia while Moscow helps Pyongyang to advance its nuclear program. “If North Korea sends soldiers and weapons against Ukraine, while Russia supports Pyongyang’s nuclear programme, then this jeopardises peace both here and in the Indo-Pacific,” she said.

In response to Baerbock’s comments, a Chinese Ministry of Foreign Affairs spokesperson, Lin Jian, rejected the accusations. “China firmly opposes baseless accusations and scapegoating, as well as political manipulation,” Lin said, reiterating China’s long-standing position on the Ukraine conflict. China has maintained that it is neutral in the war, stating that it does not provide lethal assistance to either side, unlike the United States and other Western nations. However, China’s close political and economic ties with Russia have led NATO members to label Beijing a “decisive enabler” of the war, which it has never condemned.   

 The German foreign minister has been a strong advocate for Ukraine, consistently calling on Beijing to take a firmer stance against Russia’s invasion. In an interview last year, she made a direct comparison between Russian President Vladimir Putin and Chinese President Xi Jinping, suggesting that a Russian victory would embolden other dictatorships around the world. “If Putin were to win this war, what sign would that be for other dictators in the world, like Xi, like the Chinese president?” Baerbock said in September 2023.

 As Baerbock prepares for her visit to China, the future of the German-Chinese relationship is at a crossroads, with competing priorities on issues of economic cooperation, global security, and human rights. They will have to balance these challenges so that China-Europe relations are stable in the coming years.  

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Lithuania expelled three employees of the Chinese embassy

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According to the Foreign Affairs Ministry of Lithuania, the country declared three Chinese embassy staff as personae non grata and gave them three weeks to leave the country. The ministry based its decision on the Vienna Convention and Lithuanian legislation but provided no further details.

Even before the expulsion, the relations between China and Lithuania were tense. Two main reasons thereof are the support of Taiwan and the suspected involvement of a Chinese ship in the damage of sea cables. The latter refers to the severing of two Baltic Sea telecommunications cables, including one connecting the Swedish island Gotland and Lithuania, at the start of November. The suspicions over Chinese involvement are based on the route of a Chinese ship, Yi Peng 3 – according to the tracking sites, the ship sailed over the cables around the time of the damage. Finland, Sweden, and Lithuania started the investigation into the severing of the cables as a joint team, with the assistance of Eurojust, the European Union criminal law cooperation agency.

According to the statement made by the Chinese Foreign Ministry, China strongly condemns and opposes the decision made by Lithuania and reserves the right to implement countermeasures. The Ministry underlines that Lithuania has presented no reasoning for deeming Chinese staff unwelcome. The subject of Taiwan is discussed in the same statement as well and mentions the „serious violation of the One-China principle“ by Lithuania, which, according to the Ministry, created challenges in Chinese-Lithuanian relations. For context, the mentioned „violation“ refers to allowing the creation of a De Facto Taiwanese embassy in Lithuania.

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