Trade war chaos: China pumps cash into economy ahead of talks with Trump lieutenant

The Chinese Government has moved to shore up the world’s second biggest economy as it readies for crucial trade talks with the US later this week.

A plan released on Wednesday cut interest rates and pumped cash into the Chinese economy in a bid to fire up local spending.

Also on the list were pledges to back technology development, encouragement for Chinese foreign-listed firms to shift home, and support for exporters hit by President Donald Trump’s tariff chaos, according to reports.

It comes as the world grapples with America’s shocking move away from the free market international trade system it had designed and dominated through the 20th century.

All eyes will be on Switzerland this week after confirmation this morning Chinese vice premier He Lifeng will meet US trade secretary Scott Bessent within days for negotiations on a deal.

That follows an extraordinary series of trade tax hikes between the two countries leaving tariffs of more than 100 per cent in both directions.

Economists at big four bank ANZ said the size of the economic measures revealed on Wednesday were similar to announcements in September last year that boosted sentiment in financial markets.

But ANZ said the package showed China’s Government was concerned about hitting its 5 per cent economic growth target and unemployment could be under pressure, especially in coastal regions.

“The timing of the announcement offers a policy buffer for Chinese exporters before the trade talk between US and Chinese officials in Switzerland this week,” a research note by the bank said.

“The authorities are prepared to have a protracted negotiation and hold a strong stance against protectionism.”

China is the biggest destination for Australian exports, with sales from WA alone last year worth more than $120 billion.

Economist Sophia Angala said those exports were now largely used for internal consumption in China, instead of predominantly as inputs for manufacturing products sold on into markets such as the US.

That would reduce the potential flow-on effect of the trade war.

“Overall, Chinese commodity imports are likely to remain strong and this should help mitigate slowing demand for Australian exports,” she said.

But she said trade flows will switch away from iron ore towards metals used for clean energy over the longer term.