China is not seeking to dominate global markets, says Bai Chong-En, one of the country's leading economists. The driving force behind the high export levels is intense internal competition.

Bai Chong-En, dean of the School of Economics and Management at Tsinghua University in Beijing, continues to advocate for close economic ties with the West, even in the era of Xi Jinping and Donald Trump. DER STANDARD spoke with him ahead of the St. Gallen Symposium, which Bai will attend in May.

STANDARD: For a long time, China's economic rise was admired, but in recent years, there has been growing fear that China aims to dominate the global economy. Is this concern justified?

Bai: I don't believe that China seeks to play a hegemonic role.It simply wants to keep up with global competition. The United States is still the strongest economy, and China is catching up. To achieve this, it must closely cooperate with other nations. I firmly believe that trade benefits all countries, and China's products are a win for consumers and industries worldwide.

"Chinese companies have focused early on electric mobility and are working hard in this field."

STANDARD: However, the massive trade surpluses that China has accumulated for decades are viewed as a problem by other countries, especially by US President Donald Trump.

Bai: The trade surplus has recently dropped to only two percent of GDP, which is not particularly high. China has a large surplus in goods exports, but it imports many services. In 2007, the trade surplus was still nine percent, and the discussion is shaped by the memory of that time. However, that is no longer the reality.

STANDARD: The accusation remains that China does not engage in fair trade, heavily subsidizes its own industries, and keeps its markets closed.

Bai: The Chinese market is primarily characterized by fierce competition among domestic companies, and it has become tougher. This competition creates pressure on suppliers in other countries, but it benefits everyone who buys products.

STANDARD: We are currently witnessing China dominating the global electric vehicle market, which has also triggered countermeasures in the EU. Is there a government-controlled strategy behind this?

Bai: The government wants the industry to be competitive on a global scale, which is beneficial for the world and also for China. Electric vehicles have made the air much cleaner. When Beijing hosted the 2008 Summer Olympics, the air quality was an embarrassment. Seventeen years later, it has improved significantly. Chinese companies have focused early on electric mobility and are working hard in this field. However, the market leader is still Tesla.

STANDARD: Aren't state subsidies crucial for this development?

Bai: Subsidies are often overestimated. Their goal was never to dominate the global market, but to nurture an industry that is beneficial for China and the world. Some government support is often necessary. If there aren't enough charging stations, the electric vehicle industry can't thrive. Especially in developing countries, industries initially need government support, and this has worked well in China. However, once the industry can stand on its own, the subsidies must come to an end.

STANDARD: A particularly sensitive industry is steel, on which the US is now imposing new tariffs. China has been flooding global markets with its steel for years.

Bai: We must not forget the history when we talk about steel. After the global financial crisis in 2008, China stimulated its economy with high government spending, which benefited the entire world. A key element of this was massive investment in infrastructure, which created a huge demand for steel. Many steel plants were built, and in hindsight, there were too many. I don't think the government is still subsidizing steel today.

STANDARD: China's economy faces significant new challenges today, foremost among them high levels of debt. How dangerous is this?

Bai: The debt of local governments is a practical issue, and efforts are being made to address it. However, it will take time. There is also a massive surplus in the housing sector, which can only be reduced gradually.

STANDARD: How can China free itself from its dependence on exports, which causes so much ill-feeling worldwide?

Bai: It is true that we need to increase consumer demand, but that is difficult, more difficult than stimulating the economy after the global financial crisis. Consumers make their own decisions. How do you encourage them to spend more? One way is to strengthen the social net, and the government has been spending more on this for years. For instance, the value-added tax was reduced from 17 to 13 percent, and social security contributions were lowered. After 2008, private consumption also increased, but now it has stagnated. There is still a lot of room for maneuver.

STANDARD: How big is the danger posed to the Chinese economy by Trump's tariffs?

Bai: In the first Trump administration, tariffs were raised even more, and China was more dependent on the US market than it is today. The shock will therefore be less severe this time, but it will still cause significant damage, both to China and the world. I hope that Washington's policies will not be too radical, and that the rest of the world can manage the fallout.

STANDARD: What can China and other countries do now?

Bai: All countries must work to open their markets more. In China, many barriers for foreign service providers have been dismantled in recent years. The requirements for foreign financial service providers to form joint ventures have been reduced, and subsidies in the automotive industry have been cut. Overall, trade barriers have become smaller.

STANDARD: The success of the AI provider Deepseek was a shock to US tech giants. Is China leaving the world behind in technology?

Bai: No, we are still lagging behind other countries. But China has invested heavily and has large human resources, so it's no surprise that there are breakthroughs. Deepseek has the advantage of energy savings and is open-source. This is particularly beneficial for Europe.

STANDARD: The world is in danger of breaking into separate economic spheres of influence. How much is China contributing to this fragmentation?

Bai: A fragmented global economy would pose a great risk to China. This is because China has benefited enormously from globalization. Not everyone sees it this way, but I am convinced that the majority of people, business leaders, and politicians want a world where countries work together rather than against each other.

Source: DER STANDARD

Editor: Ren Zhongxi