China's excess savings and investment -- exacerbated by trade conflict with the United States -- remain its greatest structural economic challenges, but Beijing, despite its fear of a further accumulation of domestic debt, retains the ability to partially offset any trade-related economic deceleration. The Trump administration has targeted China with broad tariffs, with most Chinese exports to the United States now facing duties of 55%, as well as broader sectoral restrictions. However, China's economy has continued to register strong economic growth. To be sure, the full impact of U.S. tariffs has not yet fully materialized. A further increase in U.S. tariffs targeting China remains possible, but in the context of increased uncertainty and higher tariffs, China has taken only modest measures to soften the impact of reduced exports on aggregate demand. This is despite the fact that, aside from declining exports, China's economy continues to suffer from excess savings and...
