Chinese Economy Still Reliant on US, Both Sides Want to Maintain Trump-Xi Deal: Analyst

As China introduces export controls on drug precursors, how much confidence can the US have that China will uphold the trade deal? To discuss, I'm joined by Riley Walters, senior fellow at the Hudston Institute. Riley Walters, thank you so much for joining us here today. >> Yeah, pleasure. Uh, thanks for having me. >> Now, China's shipments to the US have fallen by double digits for the last seven consecutive months. um what's the current state of China's economy? >> Well, uh there's I think there's two parts to this. There's what China is doing with the United States and then there there's what China doing with the rest of the world. And so I think there's an argument to be made that whatever China is not shipping to the United States, they're shipping to the rest of the world. And so domestically, uh the economy in China is kind of in this malaise. You know, consumer confidence is real low. Uh investment spending is is particularly sluggish. Uh it's really deflationary. in fact. And so they're trying to look at how to how to export all this manufacturing that they have. And since the United States has all these higher tariffs than other countries at this this point, they're really taking advantage of uh uh emerging markets, Southeast Asia in particular, has been actually quite struggling with the exports coming from China. It's a real problem for them. >> And when you say that China is in a deflation right now, what's that like for uh the average Chinese citizen? Again, consumer confidence is just at a particularly low point. Uh people don't really want to spend money. Uh wages aren't particularly rising, so that doesn't help. Uh the things that they've invested in like the property sector, you know, they're not really getting returns on a lot of their investment. And so, it's what do you do when you have uh you know, really no growth uh going on? You can't spend it on particularly luxurious goods. uh you know maybe uh some services maybe you go out but even then it's uh if there's no confidence there people just don't want to spend money >> and um when asked about uh de-risking from China moving uh the US completely away even from China's economy uh the China hawk Gordon Chang said that it'll probably take about half a decade before we can be completely independent from China. Uh what's your take on that timeline? I don't want to, you know, comment on timelines because there's there's actually uh two parts of that. It's what the United States wants to do and there's what China wants to do. China's been trying to decouple from the United States for a decade already. So if if another 5 years is enough to get that done, I don't know, maybe it'll take 10, maybe it'll take 20. But uh the Chinese themselves are actually quite expeditious in making sure that they aren't relying on the US economy any more that we are than them. In fact, they're they're much better at decoupling from the United States than we are from them. And so, what does it mean to derisk de uh decouple completely? Uh we'll see. But I I think this administration is very interested in reducing its reliance. uh it does want to, you know, re uh reshore a lot of manufacturing or at least have friends and allies do a lot of that lifting instead of relying on China particularly for critical minerals and other sensitive things that could potentially put the United States at risk. >> And so with this recent deal between the US and China on trade, um part of it comes down to lowering tariffs for China, their promise to crack down on fentinel. Now, we know a house select committee on the CCP report from last April found that the Chinese Communist Party is directly subsidizing the export and manufacturer of fentinel precursor chemicals making their way to the US. China just now uh put 13 of these precursor chemicals on the export restriction list. Do you see that as a sign of this deal working out? >> Uh you you could say that. Yeah, I I think there's a lot of interest in both sides to maintain whatever Trump and Xi Jinping negotiated uh in South Korea. I you know the the the precursor thing, China could handle this years ago if they really wanted to. Uh and even looking forward going ahead, you know, I think there should be a lot of skepticism in what China announces because as the old adage goes, trust but verify. You can believe what they're saying, but if we don't actually see it, then the whole deal is just out of the window. Uh I I do think that you know uh both sides have been talking about pausing a lot of the restrictions that they've announced or uh plans to impose new restrictions. Uh they've been putting those on hold and they plan to do that for the next uh 12 months. Again, we'll see if things can actually stay steady. Again, uh politics might change a lot of that. I think the Chinese economy at this point is still somewhat reliant on the United States. you know, not to contradict what I was saying earlier, but there's still an interest to maintain some level of economic uh business uh between the United States and China from both Chinese side and the American side. And so whether the deal can hold up or not, that that's a different question. Um I think they are trying at least at this point to have a deal that has has a little bit more shelf life on it than you know just a month or two months. Uh recently in a meeting with President Trump, Japan's prime minister Takayichi said that she's willing to raise the uh defense spending of the country to 2% of their GDP by March, way earlier than initially expected. What could this mean to the CCP seeing how the CCP has been increasingly aggressive in that region? It >> it's it's not just Japan, it's a lot of countries in the region. I think they're very being very proactive in supporting their own defense interests, which is is great when we're talking about US alliances. This is what the United States really wants to see, not just what the countries themselves want to see, uh, but we want to see them take up more responsibility in their own defense. And Japan is doing that. I mean, they are they are, like you said, actively spending much more and looking at different systems that really help their defense and security interests. Of course, China's going to be upset. No one no one in Beijing likes it when uh they don't have complete control over the entire region. And so for Japan who's their neighbor to say that actually we're going to have our own defense interests, the CCP isn't quite interested in that. And so it's no surprise. >> Riley Walters, thank you very much for your insights here today. Thank you for having me.