In a strategic shift to broaden its countermeasures against the US, China has begun implementing tactics aimed at eroding the US service trade, following several rounds of retaliatory tariffs on goods. This marks a significant escalation in the ongoing trade conflict between the two global powers. Meanwhile, a Chinese foreign ministry spokesperson shared a video this morning featuring the late Chinese leader Mao Zedong, who can be heard saying, "No matter how long this war is going to last, we'll never yield."
In a strategic shift to broaden its countermeasures against the US, China has begun implementing tactics aimed at eroding the US service trade, following several rounds of retaliatory tariffs on goods. This marks a significant escalation in the ongoing trade conflict between the two global powers.China has started to target certain areas where it runs the largest services trade deficits with the US, namely travel, especially tourism and study abroad; intellectual property fees; and transport services.
According to China's latest white paper discussing Sino-US trade ties (see here), the US services trade surplus with China reached $26.57 billion in 2023, more than 11 times the 2001 value. While Beijing has used this statistic to argue that bilateral trade is more balanced than the White House suggests, it also exposes a potentially vulnerable target as China seeks new ways to counter mounting US pressure.
China's Ministry of Culture and Tourism fired the first shot. Last night, the ministry urged Chinese travelers to carefully assess risks before visiting the US, citing deteriorating bilateral relations, as well as security concerns within the US.
Concurrently, China's Ministry of Education has issued a warning against studying in certain parts of the US, specifically citing Ohio's new higher education law in March. This recently passed legislation contains negative provisions related to China, such as restricting educational exchanges and cooperation between Chinese and US institutions, and prohibiting state universities from accepting donations or contributions from China or related entities.
These moves came shortly after China raised its duties on all US imports to 84 percent from 34 percent in retaliation for US reciprocal tariffs, effective around midday China time today. The Ministry of Commerce, or Mofcom, also launched other counteractions, including subjecting more US entities to export controls and sanctions under the Unreliable-Entity List (see here).
In a tit-for-tat response, US President Donald Trump slapped a punitive 125 percent levy on all Chinese goods, while backing off his tariffs on most other nations for 90 days (see here).
Online discussions, amplified by Chinese bloggers and media, have floated potential countermeasures targeting US services, including restricting US companies from Chinese government procurement and limiting partnerships with US consulting firms in the legal and financial sectors. Such measures would target high-margin services and could be framed as a “precise and justifiable” retaliation.
Gao Lingyun, a researcher at the Chinese Academy of Social Sciences and government think tank, warned that China would take aim at services trade if the US continues its current course of action, according to Yuyuantantian, a media outlet affiliated with state broadcaster China Central Television.
Observers speculate that these orchestrated commentaries reflect Beijing's efforts to control the narrative and rally domestic support as the trade dispute threatens to intensify.
— IP battlefront —
Because IP makes up much of the US trade surplus, calls are growing for Chinese authorities to investigate IP-related income generated by US companies, which were accused of extracting “massive monopolistic interests” from the Chinese market.
IP royalties accounted for 13.1 percent of the US income from services trade in 2023, according to the Chinese white paper. Specifically, the US received one-fifth of the royalties from China out of the total amount obtained from the Asia-Pacific region, representing 5 percent of the total royalties received by the US globally.
China also has new regulatory tools at its disposal on the IP front.
A set of Chinese regulations (see here) governing foreign-related IP disputes is set to take effect on May 1, addressing abuses of IP rights and unreasonable restrictions on global trade and technology transfers.
The new rules empower Mofcom to launch probes or take action on IP owners’ practices that harm fair competition in cross-border trade, such as preventing licensees from challenging the validity of the licensed IP rights, engaging in cohesive bundled licensing and imposing exclusive grant-back terms in licensing agreements.
The mechanism is seen as a complementary tool to antitrust investigations, which have a higher threshold because they require establishing that the IP holders have dominant market positions.
As matters stand, IP disputes appear to have driven recent state intervention. Last Friday, China initiated an antitrust probe into US chemicals giant DuPont's Chinese subsidiary (see here).
The investigation signals an eye-for-an-eye response to DuPont's Section 337 complaint filed with the US International Trade Commission in late 2024. DuPont accused a group of Chinese companies of infringing on its trade secrets and trademarks associated with flash-spun nonwoven materials.
To Chinese rivals, DuPont's action is viewed as an attempt to retain its dominance over the technology even after associated patents have expired.
— Nationwide endorsement —
As Beijing takes a harder line abroad, it is marshaling resources from state investors, banks, insurers, and private corporations to bolster market confidence and deliver practical support.
On Tuesday, just before the opening of China's A-share market, major regulatory bodies and state-backed entities signaled their strong confidence in the capital market's future and pledged to ensure its stable operation. The People's Bank of China, or PBOC, and the National Financial Regulatory Administration, along with Central Huijin Investment issued statements aimed at reassuring investors.
Central Huijin Investment, a key shareholder of China's largest banks and insurers, plans to increase its holdings in A-share stocks, with the PBOC pledging to provide ample re-lending support. The National Financial Regulatory Administration also committed to raising the proportion of insurance funds invested in mainland Chinese equities.
Simultaneously, both state-owned and private companies have announced share repurchases and stake-increase plans.
China Chengtong Holdings Group, the state-owned capital operation platform of the State-owned Assets Supervision and Administration Commission, plans to use 100 billion yuan ($13.6 billion) of re-lending funds to increase its holdings in listed companies.
Contemporary Amperex Technology, a leading lithium-ion batteries manufacturer, will buy back shares worth between 4 billion and 8 billion yuan.
Private companies are rallying to the cause, too.
At today's press briefing, Mofcom spokesperson He Yongqian said the ministry recently held discussions with business associations, large supermarkets, and distribution enterprises to help foreign-trade businesses expand local sales channels. Previously, Mofcom has described China's “super-large-scale” domestic market as a “strong backing” for the companies.
On April 3, Chinese e-commerce platform Pinduoduo announced its "Trillion Yuan Assistance Plan," pledging to invest more than 1 trillion yuan over the next three years to support merchants' efforts to transform and upgrade their businesses. Specifically, the plan aims to help cross-border merchants stabilize production, reduce costs, and improve efficiency, enabling them to weather the risks arising from “the increasingly complex international tariff landscape.”
Yonghui Superstores, a Chinese supermarket chain operator, has rolled out several supportive initiatives for local exporters affected by the China-US trade war (see here).
Also earlier this week, Fujian Province, a major player in China's export-oriented economy, unveiled strategies to further foster the integration of Fujian's domestic and international trade sectors.
Under this plan, Fujian will offer "one-on-one" assistance for foreign-trade enterprises to expand into the domestic market, absorbing products that have encountered export obstacles. This assistance will be based on in-depth research into the companies' specific needs.
But the pivot to domestic spending will be an uphill battle because post-Covid challenges, unemployment and a property slump have dented spending appetites. Consumption accounted for just 44.5 percent of China's GDP growth last year, down sharply from 82.5 percent in 2023, official data show.
— Forging connections —
Recognizing that any reconciliation with Washington will only provide temporary relief, China is diversifying its economic ties beyond the US to secure long-term stability.
On Tuesday, Chinese Commerce Minister Wang Wentao held a video conference with Maroš Šefčovič, the EU's Trade and Economic Security Commissioner, stressing yet again China's willingness to deepen trade, investment, and industrial cooperation with the economic bloc. This meeting followed a prior dialogue between Chinese Premier Li Qiang and European Commission President Ursula von der Leyen (see here).
Both sides agreed to begin consultations on market access, negotiate electric vehicle pricing, explore investment in the automotive sector, and revive bilateral talks to address trade diversion issues and diffuse frictions.
Yesterday, Wang held a video call with Malaysia's Trade Minister Zafrul, currently representing ASEAN's rotating chair. Wang affirmed China's intention to collaborate with the ASEAN nations to resolve mutual concerns, reinforcing the multilateral trading system.
Zafrul criticized US trade policies as running counter to World Trade Organization rules and expressed "full respect" for China's position. He pledged Malaysia's support for multilateralism, urging ASEAN to collectively address US reciprocal tariffs.
While the US is open to striking a deal with China, Beijing insists that negotiations must be based on mutual respect.
"As to how long this war will last, we are not the ones who can decide," said the late Chinese leader Mao Zedong in a speech, as seen in a video shared by Chinese Foreign Ministry spokesperson Mao Ning on her X social media account this morning. In the historic speech, Mao Zedong noted that the decision rests with the US president.
"No matter how long this war is going to last, we'll never yield," Mao Zedong declared. "We'll fight until we completely triumph."
China has consistently reiterated its resolve to "fight to the very end." However, for Beijing to maintain a strong negotiating position, it must work diligently to ensure social and economic stability, given the lessons learned from its sudden U-turn on the strict zero-Covid strategy.
—Analysis by Emily Liu, Xiaoqiong Gao, Yang Yue and Yonnex Li
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