What's driving China's resilient Q1 trade performance?
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Hello and welcome to World Today, I'm Zhao Ying. Coming up, on a visit to Vietnam, Chinese President Xi Jinping urges deeper cooperation between the two countries in building a community with a shared future. How significant is the trip? China's foreign trade started steady in the first quarter. What's driving this resilience amid external uncertainties?

And Donald Trump suggests tariff exemptions for smartphones and other tech products imported from China are just temporary. What's behind the back and forth in Washington's trade policy? Chinese President Xi Jinping has pledged to work with Vietnam to map out a new blueprint for the building of a community with a shared future.

In a written statement upon arrival in Hanoi for a state visit, President Xi noted that this year marks the 75th anniversary of the establishment of diplomatic ties, and the two countries have demonstrated the bright future of the socialist system. He expressed wishes for long-lasting friendship and prosperity in Vietnam. This is the first leg of President Xi Jinping's tour in Asia and will also take him to Malaysia and Cambodia.

Ahead of his departure, the president urged the two countries to contribute more to peace, stability, development and prosperity in Asia and the world at large. In a signed article published in Vietnam's Nàn Đăng newspaper, the Chinese leader called for deepening strategic mutual trust, advancing socialist cause, continuing win-win cooperation and delivering more benefit to people of the two countries.

Meanwhile, Chinese newspaper People's Daily carried a signed article of General Secretary Thieu Lam of the Communist Party of Vietnam's Central Committee. The Vietnamese leader highlighted the history of friendship between the two countries and said closer economic and trade relations have brought tangible benefits to people of the two sides.

For more, we are joined by Rongying, senior research fellow at the China Institute of International Studies. How significant is President Xi's visit to Vietnam at this particular geopolitical moment? I think the visit coincides many important occasions.

As far as China is concerned, certainly for President Xi himself, this is the first ever overseas trip this year. And for Vietnam, interestingly, it coincides with many important anniversaries. The 19th anniversary of the founding of the Vietnamese Party, Communist Party of Vietnam, the founding of the Vietnamese Republic, and also I think the liberation

liberation of the South of Vietnam. But the most important that I think this year marks the 75th anniversary of the established diplomatic relations between China and Vietnam. So the visit took place, is taking place in a very special sort of occasion, besides, apart from the ongoing fast changing geopolitical situation. So I believe that the significance most importantly is

I think lie in the fact that China and Vietnam, particularly the leadership, top leadership, well, a lot of things to talk about bilaterally, regionally, but most importantly, I think how China and Vietnam's strategic partnership, the strengthening and the bonding relationship will provide a sense of stability and also impetus for further deepening the relationship between China and Vietnam. Well,

President Xi emphasized building a China-Vietnam community with a shared future. How do you interpret this concept and what does that suggest about China's long-term goals in its relationship with Vietnam? Indeed, this is a very much important goal, but also I would say it's a very important vision for China and Vietnam, which of course it was first agreed

when President Xi visited Vietnam last time, I mean, back in December 2023. And the vision of building a community of shared future ever since then has served as kind of overarching goal and also a vision to guide the two countries to broaden and deepening their relationship, a strategic partnership towards kind of a

our community of a shared future with strategic importance. And the significance and importance of this vision will certainly, I think, serve as a guiding principles for the years and decades ahead as we are just discussing and looking at the significance of the visit.

Well, President Xi also mentioned advancing the socialist cause. So to what extent do you think these shared socialist ideals are shaping China-Vietnam partnership today?

Yeah, the socialists, I mean, both China and Vietnam have adopted a kind of socialism with their respective characteristics. And that has also been very unique and special in terms of the bilateral relation between two countries, if we are going to make a comparison or contrast with other relations.

aspect being the social, I mean, the two countries, two communist parties pursuing the socialism with their respective relationships, I mean, with their respective characteristics as a very important part. And as we know, and I think we are going to see not only, I think, the exchange of views, experience of governance at the

nation level but the equally important i would say even arguably more important at the party level how to govern the party and how to ensure that the the the guidance of the party uh being the the the ruling party that would guide the two nations to pursue their respective

sort of a development strategy and which in light with the changes and transformation of the party and also equally important of the nation as well.

President Xi called on Vietnam to help safeguard the multilateral trading system by ensuring stable supply chains. He also warned that trade wars and tariff wars produce no winners. But how can China and Vietnam work together to really uphold that system, especially in the face of rising tariffs and economic pressures from the U.S.?

I think first and foremost, China and Vietnam are two sort of most important participants of this current international multilateral

trading system. And as a matter of fact, I think since China's reform, the opening up and Vietnam's as well, the progress and achievements that have been achieved at the economic and other aspects has largely benefited from that system. And of course, the other countries in the region and the world at large. So it is, I think,

of great utmost importance for China, for both China and Vietnam to ensure that system remains relevant and against the, I think, the abuses of terrorists for the United States and other

sort of corresponding negative developed. But most importantly, I think as two countries share such a kind of benefits in working together to safeguarding that system, the multilateral trading system, it is also, I think,

serve the mutual interest to ensure the principles, the rules, the norms that has been upholding the system will remain so that they will continue to enjoy a favorable international environment to pursue their respective. So it is on the one hand for the self enlightened interest of both China and Vietnam, but more importantly, I think

We're talking about, we're looking at the system, looking at about the rules and rules of the games, specifically related to the multilateral trading system. Well, President Xi highlighted cooperation in areas like 5G, artificial intelligence and green development. So what opportunities do you foresee in these emerging sectors?

I think China and Vietnam has made great progress, indeed, as a very depth and the wise, I mean, a broad cooperation at the traditional areas. And I think the ongoing video, they were going to see that more were becoming in

in terms of improvement of infrastructure, particularly railways and others. But the emerging areas, the green tech development, the digital development, and also I think a development sector related to that, equally, if not more important to that. This is an area where

I think these emerging areas, emerging sectors, where it's going to continuously sort of providing impetus for the ever sustainable development of the two countries. That is the vitality. That is, I think, the reason why the relationship between the two countries

despite the differences, I mean, there are differences, they have been able to maintain a steady and solid development over the past decade. And also President Xi cited the successful delimitation of boundaries in the Beibu Gulf as a model for resolving maritime issues. So does that signal a realistic path toward de-escalating tensions and fostering cooperation in the South China Sea?

Yeah, I think that's not a secret that China and Vietnam are neighbors. So naturally, there are some differences, disputes, particularly related to the

Boundaries, maritime issues, and so on and so forth. And I think thanks to the strategic guidance of the top leadership, President Xi and the Vietnamese leadership, and also the great effort that has been done jointly by the two sides, these differences have been very much well under control.

And furthermore, I see the tendency that the two sides will continue to work along the line. I think this is very much in line certainly with the political sort of diplomatic region, but more importantly, it's set an example.

example, how the two neighbors, despite the differences, I think they share the commitment to manage that relationship. I mean, these disputes, differences as well. And more importantly, to work together to pursue a kind of settlement that's

students their mutual interest and mutually acceptable to that and also equally important is for the peace and stability of the region in this case i think the south china sea well she stressed strengthening cultural and people-to-people ties such as through tourism and youth exchanges how important are these soft power initiatives in solidifying bilateral relations

That is again a very important area where China and Vietnam have seen, I mean the relationship has seen greater, making steady and greater progress. And this year marks the, I think the year of P2P, people to people and cultural exchanges as one of the sort of other way to celebrate the commemorate

70th anniversary of the founding of diplomatic relations. But the most important that I think that the relationship between two peoples have over the past decade, see steady progress, despite I think the differences. But all you know, I think China and Vietnam, the Chinese people and the Vietnamese people share a lot of similarity and close affinity in terms of culture and people to people relations. And I believe that with the continued

care and nurture of the top leadership and also closer sort of economic trade relation with practical cooperation. We're going to see people-to-people relation but will continuously serve as a sort of ballast to support, to sustain that wider region strategic long-term cooperation.

So preparing the ground for fulfillment of a community-shared future between China and Vietnam. That is Rongying, Senior Research Fellow at the China Institute of International Studies. You're listening to World Today. Stay with us.

Welcome back. This is World Today. I'm Zhao Ying. China's foreign trade remained steady in the first quarter with exports showing strong resilience. Official data shows foreign trade value rose 1.3% to over 10 trillion yuan or 1.4 trillion U.S. dollars. Exports to over 170 countries rose nearly 7% to 6.1 trillion yuan, while imports dipped 6% to 4.2 trillion yuan.

Private enterprises drove over half of all trade at 5.9 trillion yuan, with high-tech product trade hitting record highs. Foreign-funded firms saw growth of a fourth straight quarter, with active traders surpassing 67,000, the highest level in three years. For more, we are joined by Dr. Yao Shujie, Chang Kong Professor of Economics at Chongqing University. Dr. Yao, thanks for joining us.

Hi. So despite external pressures, China's foreign trade grew by 1.3% year on year in the first quarter. What factors do you believe contributed to this resilience and how sustainable is this growth trajectory?

China has become the most comprehensive and competitive manufacturer in the world. And there's a strong demand for Chinese manufacturing goods, which is a fairly stable, high quality with reasonable price.

So the import and export figure in the first quarter actually refrag, because the export grew by 6.9%. How are we waiting for the import growth, which is actually contracting by 6%. So overall, the volume of total trade is 1.3%.

It actually reflects China's competitive advantage and competitiveness in the international merchandise trade. Whether it is sustainable actually depends on a number of factors. I think domestically China is still doing very well because the industrial sector is quite efficient compared to the rest of the world.

But we can see that over the last few days, there is a lot of discussion and also turbulence triggered by Donald Trump of the US one-sided single tariff rise to a level which is quite unreasonable. So there is a lot of uncertainty for the near future to come.

Although I hope that intensive discussion between China and the United States and also both countries with the rest of the world will be continued to a point that people are able to make some compromise.

But if people are not able to make compromise, I think the future will be relatively risky. So we have to see for the next couple of months of how the Chinese exporters deal with the uncertainty in the international market.

Okay, so exports surged by 6.9%, but imports fell by 6%. How would you interpret this divergence? And what does that suggest about China's domestic demand and industrial activity? I think on the positive side, it implies that China's export is still fairly strong. But on the cost side, it could reflect the weakness of domestic consumption.

Because the domestic demand is probably weakening, as you see, the import is declining and export is expanding. So there is some overcapacity in the producer sector that needs to be exported. So it is a mixed signal for these kinds of figures.

Ideally, we expect both import and export to grow in the same range, rather than have a divergent level in this situation. I think on another positive note is because China's trade surplus is certainly rising,

But maybe we don't need so much trade surplus. We need a stronger domestic economy which can digest the production and also import more goods from abroad. So this will require some sort of market adjustment and also the industrial transformation as well as the stimulation of domestic consumption.

Okay. And notably, despite the tariff measures from the Trump administration, China-U.S. bilateral trade grew by 4% in Q1. But how sustainable is this growth? And how is China adjusting its trade strategies to mitigate the impact of the tariffs?

Yes, the Sino-US bilateral trade is still continuing to rise despite so many years of trade conflictions triggered by Donald Trump as well as maintained by Biden. And this time is even exaggerated by Donald Trump's 2.0 term.

So, I think that domestic consumers in the US market and also the intermediate producers, they require a lot of high quality but lower priced Chinese-made product to sustain the domestic consumption and production without causing too much domestic inflation in the US market.

So the mutual trade between the two countries certainly has benefit for the US. However, if the Donald Trump administration doesn't make any concessions or further concessions, then the situation could be complicated in the second quarter.

Now, the first quarter is encouraging. We should see the bilateral trade is certainly moving in the right direction despite the previous confessions. I just hope that some further positive steps will be taken by Trump and the administration so that the bilateral trade will not be highly devastated by the one-sided policy.

Yeah, and also we see that China's trade with Belt and Road partners actually accounted for over half of China's total foreign trade. So does this signal a strategic pivot toward BRI markets? Yes, I mean, the BRI country has certainly become a fairly dynamic and fairly strong force with China's international trade investment in people-to-people exchange.

As you can see, the presidency just visited Vietnam, and also going to visit Malaysia and Cambodia. So this concept, visiting at the state level, is encouraging and stimulating China's investment in trade with the BRI countries. It certainly is one of China's strategy to diversify.

the destination of foreign trade, - rather than depending on a number of traditional countries - such as the United States, - which may subject China to a high-risk situation like we see today.

So by diversifying into some other economic bloc and countries, especially the BRI countries and also ASEAN, the European Union, or also Argentina and Africa, which would be beneficial for China's long-term resilience.

in terms of international trade expansion. And we are seeing growing optimism among foreign investors with trade by foreign-invested enterprises on the rise. What is driving this renewed confidence in the Chinese market despite ongoing geopolitical uncertainties?

Well, number one is China's gigantic domestic market, the Chinese fairly complicated industrial and service economy, which provides a significant scope for foreign investors to make profitable investments.

Secondly, China's political stability and China's determination to be open and also uphold the consistency of protection of foreign investors' interests

unlike Donald Trump, which is highly unpredictable. This actually sends a very strong signal to foreign investors that if you invest in China, you are investing for the future of your companies.

And this message is certainly penetrating into different major economy and also many multinational company who would look China as a safe haven, rather than a risky investment.

China will provide a fairly safe market environment, legal environment, and also consistent government policy to make sure that foreign investors can make reasonable profit and stable profit for their money.

Yeah, and very briefly, we see the number of private enterprises engaged in foreign trade hit a record high. So what policy changes have supported their competitiveness, especially for small and medium sized enterprises? Very briefly.

yeah the private enterprises have become a pillar of china's economic growth and also certainly in the foreign trade which accounted for over uh more than half of chinese over you know foreign trade and also continue to expanding in the future this is because of the government policy support because of industrial policy which are

more friendly to the private sector, encouraging for the investment and protecting the property rights and also the interests of entrepreneurs. Thank you, Dr. Yao Shujie, Chang Kong Professor of Economics at Chongqing University. You're listening to World Today. We'll be back after a short break.

This is World Today. I'm Zhao Ying. U.S. President Donald Trump suggests tariff exemptions for smartphones and other tech products imported from China could be short-lived.

On Friday, the White House announced the exclusion of some electronic products from steep tariffs on China. However, Trump wrote on social media that nobody is getting off the hook. He said Chinese tech will still be subject to 20% tariffs and are just moving to a different tariff bucket. China initially welcomed the tariff exemptions, describing them as a small step in the right direction, while calling on the Trump administration to completely cancel the tariffs.

For more, we are joined by Professor Liu Baocheng, Director of the Center for International Business Ethics at University of International Business and Economics. Professor Liu, thanks for being here. Thank you. It's a pleasure. Well, the Trump administration recently exempted the smartphones and other electronics from the tariffs on Chinese imports, only to suggest that these exemptions are temporary. What do you make of this back and forth?

Well, it seems the magic wand of tariff in the hand of Donald Trump is not really creating a magic in his total favor. It reflects two competing forces within the U.S. political circle where there is a voice from economic pragmatism who would lobby for the relieved

that the restrictions over the imports are not only from China but from all over the world because it does not really serve the U.S. business it doesn't really serve the consumers and there is also insistence from those hotliners like Peter Navarro who insisted on decoupling with China even at the cost of the U.S. economy

And now this is really a temporary relief, but it may signify a strategic pause towards hitting China with the tariff whiplash. So now he leaves the world and to typically use his art of negotiation to create uncertainty in order to wait and extract concessions from China.

Right now, he's not ready to back off and forsake the whole spam. And let's see what's going to happen after this, because now he's under tougher pressure from business community and consumers, particularly now when the holiday is coming to town. Yeah, and actually he has signaled new tariffs on semiconductors and the broader electronic supply chain.

potentially under a national security investigation. Why this shift from the so-called reciprocal tariffs to the so-called national security tariffs? I mean, what's the difference here?

that is his cat trick because uh reciprocal tariff uh will have to follow the uh trade act of 1974 uh with the section 301 that is uh to him rather troublesome because you need to prove

the unfair trade practices of other countries like IP theft, like the forced technology transfer, etc. He doesn't even want to bother. So therefore, he relies on the Emergency Economic Power Act to take advantage of such a situation so that he can bypass

the Congress and create a sense of emergency within the United States, which is totally ungrounded. And now,

uh he's also able to sidestep uh the commitment to wto constraints because u.s commits uh to wto the seeding tariff uh is 3.4 percent so uh right now uh this shift uh shows his uh eagerness to bypass the law uh both at the international level and in a domestic circle but uh

Definitely it's going to be short lived because emergency cannot last long and the longest empowerment would be one year.

Right now, it is more of a tactic rather than a real strategy implemented by the United States. Okay, but analysts have described the tariff policy as mass confusion that's dizzying for the industry. I mean, what are the real world consequences of this unpredictability for supply chains, investor confidence, and also pricing for U.S. consumers?

well he's creating a hurricane which he does really personally enjoy that you know by creating uncertainty he can ship in the trouble water and wait until all stakeholders dinner so that he can pressurize on his terms so the cost is very clear there's a high cost for doing business and

a high cost of consumers, which they are going to feel even further when this whole consequence is there to transmit to their buying capacity. And investors are really jittering. They hold the money. They may be more speculative on stocks changes, but rather to put it into real production. And now the

the rest of the world are also waiting to see what is going to happen next. So now it's totally a standstill. He's really creating and he enjoys that so many other countries come to negotiate and even capitulate to his terms. But in the long run,

It doesn't really follow any of the rule-based global trade order, and it's also going to hurt the United States. He's hoping to shape a new global order under totally his own will, but I think it's unlikely.

Okay. Thank you, Professor Liu Baocheng, Director of the Center for International Business Ethics at University of International Business and Economics. This is World Today. Stay with us.

You're listening to World Today, I'm Zhao Ying. As China's Hainan province moves forward to build a free trade port system, DFS Group, a global travel retailer of luxury products, says it is adapting to the shifting consumer trends on the island. DFS is among thousands of global brands attending the ongoing 5th China International Consumer Products Expo in Hainan.

A free trade port initiative of the province is better to enter full implementation this year. Earlier, our reporter Song Ruixin sat down with Nancy Liu, president of DFS China, to discuss how multinational companies are adapting to the evolving consumer landscape in Hainan. Liu says the island can become an Asia-Pacific hub for luxury retail and international tourism, signing visa-free access and expanding airboots.

Let's take a listen. Ms Liu, this year marks DFS second time participating in the Hainan Consumer Expo. So what are your expectations for this year's event and how have you seen the Expo evolve over time in terms of international engagement and consumer focus? Certainly we are extremely delighted to be participating again in the Hainan Expo.

Over the years, we've seen the evolution of Hainan Expo brands and companies who are joining increase year on year, and in particular, the trade councils from around the world. So, for example, this year, I know the British Trade Council will have quite a large presence to introduce many of the British-made manufactured types of services and goods to

So over the years, we're very pleased with the evolution of the Hainan Consumer Expo. So from your observation, what concrete efforts has China made to attract foreign investment through the Hainan Free Trade Forward Initiative? I mean, especially in terms of policy implementation and fostering international collaboration. And in terms of your business, how has it adapted to take advantage of these developments?

Well, first of all, for the Chinese government to have had such a long vision, planning, implementation, commitment to the Hainan Free Trade Port,

has been amazing. So from a multinational corporation, we really appreciate the fact that China has had this long, patient, enduring policy to finally see to the end of 2025 the launch of the Hainan Free Trade Port Initiative. From a multinational corporation perspective, I think in our setting up of the legal entity, capital flows,

Certainly, infrastructure has been tremendous. This has been great support for multinational corporations. Also, of course, the tax incentives, the zero duties, the low corporate tax, the very competitive individual income tax, or what Hainan calls the double 15. These two policies are extremely attractive for multinational corporations.

You mentioned long vision, I mean, the Chinese government has made. So could you please elaborate more on that? Yes, well, I mean, as I'm sure you know, the free trade port has been a long time in coming, you know, from the time that Hainan became the youngest province within China, moving away from Guangdong and starting its journey on the free trade port route.

It has been since the late 70s, early 80s that Hainan has been progressing. So this is a very, very long journey. Today we're in 2025. So this is the making in over 30, 40 years for Hainan.

This has been a very long commitment by the Chinese government to ensure the infrastructure, the policies, the regulations, the people, right? Because we need the people on the ground, i.e., for example, the customs borders, the airport infrastructures, the highway, right? The soft and the hard infrastructure have all been planned and implemented over time. This requires...

a long time in terms of commitment and a very dedicated investment plan to ensure that Hainan Free Trade Port can be successful and competitive to the likes of Singapore, Dubai, Hong Kong.

Okay, let's delve into the data. I mean, recent data shows that Hainan recorded over 7 billion yuan in offshore duty-free sales within two years, and that's driven in part by new pickup options. I mean, how has Hainan successfully leveraged China's massive domestic market while aligning itself with international high-standard trade and economic norms?

Well, we can see that certainly over COVID, Hainan became extremely explosive because the Chinese were unable to travel overseas. And I think through that, Hainan also cut their teeth, so to speak, to perfect travel retail, duty-free retail.

And so while the offshore duty-free sales in the last few years indeed has picked up, and in particular beyond beauty, the mid-tier and high-end has also picked up in terms of market share. Currently, China is facing a rising obesity challenge, you may know that through media platforms. So with estimates suggesting over 65% of

adults could be overweight or obese by 2030. So in response, the government has strongly promoted healthy lifestyles. Are you seeing a corresponding shift in consumer demand at DFS? I mean, especially, for example, toward

health-related categories such as functional foods and personal care. Indeed, indeed. I mean, while we continue to see strong demand for luxury goods, we're noticing an increased interest in wellness-related products.

especially among health-conscious consumers. So, for example, we can see at-leisure. The athletic leisure scene continues to grow rapidly. So, for example, brands such as Lululemon, Arcteryx, these types of at-leisure brands continue to be performing very, very strong.

And in particular, we are expanding our offers in these categories to meet consumer preferences and to align with the growing demand for health-focused, you know, self-care type products. So what strategies do you have for those kind of growing demands? For our Hainan Yalong Bay project, we are planning to...

expand our special category and to integrate sports and lifestyle towards health-related categories to create a more engaging and innovative consumer experience. Obviously, the big global brands, such as I mentioned earlier, obviously, you've got the Lululemons, you've got Archeterix,

The domestic brands, for example, Li Ning is very strong. We are seeing a different ranking amongst the at-leisure brands. For example, I think Nike and Adidas are undergoing a change management piece right now. The more athletic leisure segment is growing faster than just the pure performance segment. I think that's the key change that we see today.

All right. In mid-March, China's central government unveiled a detailed plan to unleash more potentials in China's consumption market. So in light of the global uncertainty brought by the trade war started by the U.S., so how do companies like yours position themselves in the Chinese market? Well, we think that, you know, Hainan Free Trade Port is a bridgehead to lead China's third round of economic opening up to the world.

And Hainan is a gateway, it's a main location, right? It's a strategic location to repatriate Chinese consumption from overseas back into China. We've seen that clearly through COVID. And although last year was a bit of a surprise due to the weakness of the Japanese yen,

We saw that, for example, during Chinese New Year, this past Chinese New Year, the traffic and the consumption was coming back. So it was basically flat versus 2024. And so from a positioning perspective, apart from what we see in Hainan today, the luxury sector is a newer segment, newer opportunity for Hainan to continue to grow. And

In particular, Hainan can serve as a key Asia-Pacific gateway for global luxury brands and boost Hainan's global shopping and tourism clout. I believe that with the additional airport wing that's being built and the new flights that are being slated to come through Hainan,

the increase in inbound, not only from domestic China, but also the foreign flights that are coming through, that will also increase to increase Hainan and in particular China's consumption. I think the unique, of course, positioning of Hainan is that at the end of 2025, when Hainan becomes an official free trade port, goods that enter into China, unless they're on the list to re-sale,

receive duty, in theory, these products will become duty-free. And so from a consumption point of view, clearly, Hainan will become much more attractive as a destination for mid and luxury retailing. In particular, I'd say now is crucial, more crucial now than ever, in that the inflows of Chinese mainland going into Southeast Asia, as I'm sure you know, is extremely high.

What is interesting is that there's a reciprocal place, right? We see a lot of inbound coming into Chinese mainland as well over the last two years, right? It's been exploding. I believe that the ongoing tourism, culture exchange will continue in a very strong way. That is Nancy Liu, president of DFS China, speaking with our reporter, Song Ruixin. This is World Today. Stay with us.

You're listening to World Today. I'm Zhao Ying. Germany's economy appears likely to almost flatline this year due to U.S. tariffs on steel, aluminum and cars. German economic institutions have dramatically cut their growth forecasts for Germany this year to just 0.1% from the previous 0.8%. Export-dependent Germany is the only G7 country to have contracted over the past two years.

Analysts warn that U.S. tariffs could push the country into a third consecutive year of recession. With more, my colleague Zhao Yang spoke with Li Lun, assistant professor of economics at Peking University's School of Economics.

So Professor Li Lun, actually, according to Germany's leading research institutes, they say German economy won't see meaningful growth this year. And Trump's tariff policy threatened even bleaker outcome. So what do you think are the main challenges facing German economy right now?

Yeah, so I think there are a number of problems with Germany's economy. First, it's very highly exposed to global trade. So if you look at the share of export of product and services as a share of GDP, Germany is around 45 percent. So that number is much, much higher than China, which is like 20 percent.

and US, which is around 11 to 12%. So if we have an economy that's more reliant on export, of course, it's going to be more vulnerable to these shocks in tariffs and global supply chain. So that's, I think, the first challenge for the German economy. And the second is, Germany has

underwent years of underinvestment in infrastructure and also in the digital modernization, and these have eroded its competitiveness. And also, I think there's a labor shortage in skilled labor and an aging population, which all creates a structural problem for the

industries like manufacturing and services. And last but not least, there's a higher energy cost, which is driving up production costs and also further diminishing the competitiveness of German products.

So I think these are the, to name a few, of the challenges for the Germany economy. And for the U.S. tariff issue, this 90-day pause on tariffs, if you look at the fact that Germany being such a massive car manufacturer, it is still having to deal with this 25% car tariff huddle.

hike. So do you agree with those very dire predictions for Germany's growth prospects? And do you think it could be even slip back into recession? Yeah, I think that's a really big concern for Germany right now, because if you look at automobiles, it's Germany's single largest export product.

And so we know that President Trump has always seemed to have a particular problem with German auto imports. So right now they have like a 90 day pause. But if Germany cannot reach

effective negotiation after the 90-day pause, then we may even see broader tariff measures to snap back into place, which can make the situation worse. So even if it can strike some sort of negotiation, the ongoing 25% CAR tariff is still there. And I do know...

you know, analysts or reports that warn that Germany could dip back into recession if these trade tensions do not are not removed. But I mean, the new Germany, the new government and the new chancellor is basically more welcome to a deal to the U.S. So there's still time to strike a deal. And also we are seeing that Germany is, you know, enacting more reforms and, you know,

making more domestic stimulus and tax cuts to kind of soften the effects for the blow. So it's hard to predict the future. I think it can go either way. It really depends on how the Trump administration is going to further impose the tariffs or not, and how is the current German government is going to respond and react to this shock. And you mentioned the reform. So could you give us more details on their planning reform?

Yes, of course. So I think it's a very comprehensive reform between the German conservative, Frederick Merz, who is going to become the chancellor in May. And so he strike a deal with the center left social democrats.

and basically it kind of listed a number of items on trade, on energy, on the so-called debt break. So I think the most important thing is that they're setting up a very large investment fund, which is around 500 billion euro, to upgrade their infrastructure and to accelerate their investment in digital projects and also national defense.

They're also kind of temporarily relaxing the so-called debt break, which is basically saying that they're allowing the government to kind of increase their public borrowing so that they can use more of that money to push their investment regimes. And also, I think they are also putting tax cuts for corporate tax and also for the VAT

on foods, on restaurants. They're also more embracing, like more welcoming stance to strike a deal with the United States. And finally, I think part of the deal is also putting a harsher stance on migration.

They want to suspend family reunification for people with so-called subsidiary protection status. And also they are going to reject asylum seekers and so on. So overall, yeah, it's a very comprehensive plan. So what do you think about Germany fitting into the wider European landscape? How does the German economy compare to other European countries or economies?

Well, you know, Germany has previously been the powerhouse of Europe's development. But if you look at, you know, Germany's growth for the past two years, it's actually lagged behind other countries like Spain and France, for example. So countries like Spain are actually set to grow 2.7 percent in 2025, according to many analysts.

And also, I think Germany has a different feature with other countries in Europe is that it's manufacturer heavy and as I said, export driven. So these can be its strength when times are good, but can also become its weaknesses when we're having this global uncertainty on tariffs and so on.

Also, I think one important difference is that Germany has historically been really underinvested in its public infrastructure compared to other European countries. A report says basically the Germans investment for the public investment is around two to 3% compared to the European average. I think it's around 4%. So I think those are the kind of the features

of German economy that makes it different from other European economies. And the IMF warned that the gap between European and US economy is set to widen further by the end of the decade. It backed former ECB president Draghi's report and it calls for greater public investment in Europe. So what do you make of that? And what should Europe do to get more innovation in new and cutting edge technologies, do you think?

Yeah, so one of the actions called by the report is a significant increase in investment, especially public investment. So that we are already seeing some of that in the new reform plan by the new German government.

And also I think the report that former ECB president's report also called for an expansion on the debt issuance, which is also part of the reform plan. So I think

Besides the usual advice of putting more research and development, putting more resources into colleges and innovation, I think another thing is that they should embrace more immigration of high-skilled labor, because Germany is right now facing a structural challenge in its labor force.

For many companies, they're facing a labor shortage. But if you look at their unemployment rate, it's actually pretty high. So we're seeing this kind of dilemma with, on the one hand, there's a lack of high-skill labor, but on the other hand, there's a high unemployment rate. So I think even though the current government is putting a harsher stance on migration, but I think part of the solution to this problem is that they should really try to embrace a more, you know,

That is Li Lun, assistant professor at Peking University's School of Economics.

speaking with my colleague Zhao Yang and that's all we have for this edition of World Today. I'm Zhao Ying. Thank you so much for listening. See you next time.