Last year, China’s economy maintained steady growth, with GDP reaching RMB134.9 trillion ($25 trillion), a 5% increase from 2023. High-quality development continued, with strong progress in advanced manufacturing, technological innovation, and the green transition. Investment in manufacturing grew by 9.2%, especially in high-end and tech-driven sectors.
Despite all US efforts, China’s foreign trade hit record highs last year and its foreign exchange reserves exceeded $3.2 trillion.
China still produces the cheap goods it is infamously known for, but they are not a substantial part of the economy. US companies have shifted the production of these types of goods to Vietnam, Cambodia and Bangladesh.
China has shifted its economy to the production of high-end goods built with technical innovation. It is ironic that former US president Joe Biden’s exclusion of Chinese talent from the US under the Chips Act has accelerated China’s development momentum in these high-tech and semiconductor areas.
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Trump believes the Chinese economy is vulnerable because, like his visions of restoring Detroit’s ancient steel industry, he is living in the past. He continues to view China as an export-based economy with the US as its primary market, which feeds his tariff narrative. Thus, he thinks tariffs are an effective weapon to destroy the Chinese economy.
Although there are worries about the impact of further tariffs on exports, China’s export position relative to the US has changed a lot since 2016.
In 2016, around 33% of Chinese exports went to the US. Today, about 13%–14% of total exports go to the US. Yes, it is still a significant market, but it can no longer break China’s economy. Exports to the US could shrink to 7% or more without having a significant impact on an already robust economy. China may not be growing as fast as in the past, but the economy is not collapsing.
See also: China will ramp up stimulus if growth falters, PBOC adviser says
China’s support for multilateralism opens new markets. China remains committed to advancing high-quality Belt and Road cooperation and strengthening global trade ties. Consistent engagement with the G20, Apec, SCO and Brics reinforces China’s role in global governance and economic stability. This reduces the impact of tariffs and expands new markets in the global south.
The real economic strength lies in the future development of the technological economy. For example, China has taken a major leap in space communication with its new 100 Gbps satellite-to-ground laser technology. This breakthrough puts China ahead of Elon Musk’s Starlink in laser-based satellite communications.
This technology transmits the equivalent of 10 full-length movies per second using backpack-sized laser terminals on mobile ground stations, which reduces weather disruptions. China is setting a new benchmark in space-based connectivity that will supercharge navigation, 6G internet and remote sensing.
Tariffs do not impact digital output, service improvements or connectivity. The efficiencies brought about by this technology more than offset any tariffs imposed on more physical economic outputs. The battle between EV makers BYD and Telsa is an example to watch.
Technical outlook of the Shanghai market
The Shanghai index will react to tariffs, but many will treat this as a buying opportunity.
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The Shanghai Index has developed an upsloping triangle pattern. It is not an exact pattern, but some aspects of pattern analysis can be applied. The chart shows two powerful forces at work in the market.
The first powerful force is the resistance level near 3,435. Although this level was broken in November and December 2024, it has been a well-established resistance feature over many years. The current retreat from this level reinforces its significance.
Resistance tells us that this is where many sellers will come into the market and overwhelm buyers. Generally, this happens because this is where buying has clustered in the past and now those buyers want to get out to break even because they don’t believe the market will go higher.
The second powerful force is the upward-sloping trend line. This represents bullish behaviour. Buyers will not let the market fall because they believe it is going higher. They come in as buyers on any retreat because they believe they are getting in early on a new rising trend.
This buying activity provides support for the market. Driven by the fear of missing out on the pending uptrend breakout, buyers enter the market at increasingly higher levels, resulting in an uptrend line — a line of support.
In a perfect example of an upsloping triangle, the base is created over three to five days of trading. The height of the base is used to project potential upside breakout targets.
We do not see this with the Shanghai Index chart. However, the intersection of these two powerful support and resistance forces suggests a substantial breakout move is developing. One of these forces will be victorious. On balance, the bullish forces should dominate because of the single weak test of resistance in recent weeks. In contrast, the strength of support has been successfully tested several times, and the rebounds have provided the anchor points for the uptrend line.
A move above the resistance level is bullish and has further resistance near 3,495. A move below the trend line is bearish and could move quickly towards 3,165.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a former national board member of the Australia China Business Council
