Trade Law and Policy Reform
However, China looked beyond ASEAN countries in the third quarter, with exports to Africa and the EU mitigating the impact of US tariffs.
Nevertheless, Beijing’s report, which will review trade law for the first time since 2004, highlights its continued dependence on trade. According to CN Wire:
“China plans to amend the Foreign Trade Act and improve some reform measures into a legal framework. China will raise reform into a legal framework: negative lists of cross-border services, new trade models, digital trade and support for green trading systems.
Additionally, China’s Deputy Commerce Minister reportedly announced the following plans:
“We will build a new land with ASEAN, a marine trade corridor. China is willing to work with ASEAN to maintain the global supply chain.”
Risks to growth models
Trade data for August shows potential losses in economic momentum that could undermine Beijing’s efforts to promote domestic consumption.
When external demand is weakened, competition and price wars can fuel and narrow margins. Manufacturers can reduce staffing to manage costs and weaken emotions and consumer spending.
Commenting on the August trade data, Mohamed A. Ellian, president of Queen’s College in Cambridge, said:
“These figures are not a board for the Chinese economy, which is already facing important challenges, but they underscore the urgent need for more coordinated government efforts aimed at reforming the country’s growth model.”
Trade ceasefires and geopolitical changes
The US and China extended the 90-day trade war in August. In other words, China avoided a 145% tariff on China. The lack of progress towards a trade contract forced Beijing to reestablish relations with India and develop stronger relations with Russia. Russian President Vladimir Putin and Indian Prime Minister Narendra Modi were attending last week’s China-Russia-Shanghai Cooperation Organization (SCO).
Labor Market Concerns
Finding alternative trade routes reduces the impact of falling cargo on the US, but it is important to address labor market debilitating. The unemployment rate among young people has skyrocketed from 14.5% in June to 17.8% in July, raising the unemployment rate to 5.2% (June: 5%).
A weaker labor market could further impact demand and strengthen margin squeezes. This is a vicious cycle. Measures to increase consumption should include encouraging businesses to increase staffing levels to break the cycle.
Mainland stock markets will recede from their 2025 highs
Stocks listed on mainland China were under sales pressure in September. The CSI 300 and Shanghai Composite Index fell by 0.68% and 0.74% in September, respectively.
Despite the pullback, the CSI 300 and Shanghai Composite Index rose sharply from the start of the year at 13.49% and 14.26% in 2025, surpassing the NASDAQ Composite Index (12.88%).
Strengthening marginal slants and rising unemployment rates could further affect emotions. However, fresh stimulus targeting the labour market and consumption could raise risk preferences along with efforts to increase external demand. The US-China trade development also needs to be considered given the sluggish US demand.