As Xi prepares for Trump talks, China’s fragile domestic economy tightens the calculus

Key Highlights

• With trade, technology restrictions and Taiwan expected to dominate the agenda, China’s economic vulnerabilities are increasingly shaping the strategic calculations behind Xi’s approach to talks with the United States. STORY CONTINUES BELOW THIS ADThe contrast between China’s export-driven strength and its faltering domestic performance reflects a broader structural challenge: maintaining robust growth while rebalancing economic activity toward household demand.
• How Xi handles this dual pressure both at home and in talks with Trump may influence global economic dynamics in the year ahead. More from World As China's growth falters, Xi faces rare public calls to boost 'undervalued' yuan Trump’s new foreign policy document is bad news for IndiaExport boom, domestic slumpChina’s economy has long depended on external demand and manufacturing prowess, buoyed this year by strong export figures that have helped sustain overall growth near official targets.
• Exports expanded rapidly, pushing China’s trade surplus past $1 trillion in 2025, a modern record that reflects the nation’s entrenched role as a global manufacturing hub. Yet beneath these numbers lies a troubling gap: domestic consumption remains weak.
• Recent data show that retail sales grew just 1.3% year-on-year in November, the slowest pace since late 2022, and industrial output has stalled to its weakest expansion in over a year. Consumer confidence has been dented by a prolonged property downturn, sluggish investment and fading effects from earlier stimulus measures.
• Analysts warn such imbalances threaten the sustainability of China’s growth model, particularly as global trade tensions persist. China’s reliance on exports to offset lacklustre domestic demand is increasingly risky.