Trump-Xi talks didn’t change Beijing’s priority: flagging economy

China’s president, Xi Jinping, has met with his American counterpart, Donald Trump, for their first face-to-face talks in six years. Trump emerged from the meeting in South Korea in a buoyant mood, describing it as a 12 on a scale of one to ten. He is now saying the US will lower tariffs on Chinese imports, with Beijing giving the US better access to rare earths in return.

The Chinese government’s response was, in comparison, relatively muted. In a statement, the foreign ministry declared that both sides had exchanged views on “important economic and trade issues” and said Xi was “ready to continue working” with Trump “to build a solid foundation for China and the US”.

Despite the optimism on show in South Korea, there is still much to be done before a trade deal between the two countries is signed. At the same time, Chinese officials appear to remain cautious of the Trump administration’s unpredictability and its damaging potential for their country’s economy.

Trump and Xi’s meeting came one week after China’s top leadership laid out development priorities for the next five years, after four days of discussion in the Fourth Plenum of theChinese Communist Party (CCP) Central Committee, in Beijing. The plenum’s message is clear: China needs to boost its self-reliance.

China has been reeling from an economic slowdown in recent years. A property market crash in 2021, which saw several major developers default on their debts, caused millions of Chinese people to lose wealth. This has dampened consumer spending and has reduced confidence in the economy.

Since China began shifting from central planning to a more market-oriented economy in 1978, it has enjoyed great success by relying on two mechanisms to stimulate growth. The first is attracting investment in the infrastructure and real estate sectors. The second, which is largely considered the primary driver of China’s extraordinary growth, is the export of manufactured goods.

However, investment in China’s infrastructure and property sectors has been lackluster at best in recent years. At the same time, China has been embroiled in a trade war with the US – the largest importer of Chinese goods – since 2018. This period has been marked by cycles of escalating tariffs and retaliatory measures.

The external environment has become increasingly uncertain following Trump’s return to the White House in January 2025. Trump took Washington’s confrontation with Beijing to greater heights, imposing tariffs of 145% on most Chinese goods. Although many of these measures were later eased, the volatility of the two countries’ trade relationship was further evidenced when Trump threatened to reinstate 100% tariffs on Chinese exports just weeks before the Seoul meeting.

So, rather than relying heavily on exports, Chinese officials have announced that they intend to stimulate growth by boosting domestic consumption. Their plan is to create more job opportunities and improve healthcare and social benefits to help raise living standards. This should allow Chinese consumers to buy more goods and services.

However, improving domestic consumption will be no easy feat. China has weak social security nets, which encourage consumers to save more for uncertain times. Local governments in China, which provide public services, have also incurred huge amounts of debt in the past from excessive borrowing to fund projects. How China intends to improve living standards amid such debt is not certain.

Another key part of China’s economic plans is to become the world’s leader in AI and tech by 2035. This, like the government’s plans to boost economic growth, will also require self-reliance. The US has imposed sweeping tech restrictions in recent years to prevent advanced semiconductors and AI chips made by US firms from entering China.

These restrictions have intensified since the start of Trump’s second term. In May 2025, for example, the Trump administration ordered US chip design software makers to halt all sales to China. And even after Trump’s recent meeting with Xi, exports of advanced US technology to China still look like they will be largely restricted.

Trump said the two leaders discussed China purchasing some chips from US firms. But he clarified that the deal would not include Blackwell, Nvidia’s most advanced semiconductor, which US lawmakers have warned against allowing China to obtain. The Chinese government has not mentioned any agreement with the US regarding semiconductors.

As it stands, the US seems to be bent on ensuring that China is unable to access the tech that could aid Beijing in developing its computing and military prowess. So, to achieve tech superiority, China’s leaders have pledged more investment in education and talent. They have also promised measures to safeguard intellectual property.

Political survival

For years, China’s ruling communist party has relied on economic prosperity and nationalism to legitimize its rule. But Xi’s ability to retain control is likely to be undermined by China’s economic slowdown.

China needs a break from its external troubles, which have been induced by the US trade war and tech restrictions. And by dominating the production of rare earths, a group of metals crucial for high-tech manufacturing, China has a powerful trump card.

In early October, Beijing placed restrictions on the export of rare earths in a move that now appears to have been a calculated effort to strengthen China’s negotiating position with Washington. The strategy looks to have paid off, leading to a reduction of US tariffs on Chinese goods.

Ultimately, Xi needs victories of this sort to remain at the top of Chinese politics. If economic troubles worsen and growth continues to falter, even a leader as powerful as Xi may discover that loyalty sustained by rhetoric cannot be sustained.

Chee Meng Tan is an assistant professor of business economics, University of Nottingham.

This article is republished from The Conversation under a Creative Commons license. Read the original article.