China goes on the offensive: How it uses geoeconomics to reshape the world

Beijing is mobilizing its full diplomatic, investment, and technological capacity to consolidate its position of power against the United States

ALICIA GONZÁLEZ
EL PAÍS USA Edition

Madrid - NOV 15, 2025 - 22:00 CST

On October 30, financial markets breathed a sigh of relief. The leaders of the United States, Donald Trump, and China, Xi Jinping, sealed an agreement on camera that, although light on substance, was highly significant: for at least a few months, global trade would enjoy a period of relative stability, and the tariff escalation between the world’s two largest powers would be contained.

Above all, the message conveyed by the trade truce signed in Busan, South Korea, was a recognition of the new global geoeconomic reality: China has leveraged its worldwide dominance (90% of the market) in the production and refining of rare earths — essential for manufacturing cars, LED screens, and military equipment — to force Washington, for the first time, to roll back some of its controls on next-generation semiconductor exports. This is what Arthur Kroeber, one of the founders of financial consultancy Gavekal Research, calls the end of American impunity. In short, the foundations of the new world order contained in a simple handshake.

Geopolitics has been reshaping the world since 2016, to the point that the economy can no longer be understood without it, leaving for now a landscape we might call fractured. During his first term, Trump deepened the rift between the United States and China through an aggressive — and at the time unprecedented — trade war. Just before the coronavirus pandemic erupted in 2020, the U.S. had imposed tariffs on two-thirds of the products it imported from China. The rivalry between the two powers continued with little change during Joe Biden’s presidency, the only difference being that the White House sought to bring its allies into the offensive against Beijing. Trump’s return to the Oval Office has further deepened that fracture with China and paved the way for a strengthened alliance of countries not aligned with either of the two powers.

In 2025, China has intensified its geoeconomic offensive, deploying its full investment, diplomatic, and technological capacity to consolidate its position as a central power in the global economy. Xi Jinping demonstrated this ambition in the Chinese city of Tianjin at the end of August, when he brought together around 20 leaders under the framework of the Shanghai Cooperation Organization (SCO). For the first time since 2018, Indian Prime Minister Narendra Modi attended, sharing the spotlight with Russian President Vladimir Putin and North Korean leader Kim Jong-Un, while leaders from countries such as Indonesia and Malaysia were present in the second row as special guests. It was an unmistakable attempt by Xi to assert his regional leadership.

Military power

A few days later, many of those leaders traveled to Beijing to attend the Victory Day parade, a display of tanks, planes, and missiles orchestrated to send a clear message to the West. In his speech following the military exhibition, Xi called on the world to choose “between peace and war,” though it was not made clear who stood where. It is China’s Weltanschauung moment, as defined by Alicia García Herrero, chief economist for Asia-Pacific at Natixis — a turning point in Beijing’s vision of the world. “Trump is giving Xi a golden opportunity to reshape the world in the direction he desires,” García Herrero emphasized in a note distributed to the bank’s clients.

At the end of September, China renounced its position as a developing country within the World Trade Organization (WTO), a status that had granted it preferential treatment in implementing multilateral trade agreements since its accession in 2001 and allowed it to benefit from global trade. This move enables WTO reform and secures China a prominent role in designing the new trade model. Now that the second Trump administration insists that the global order is “obsolete” and essentially used as a weapon against the U.S., Beijing is determined to exploit the power vacuum left by Washington and play an active role in reshaping the global landscape, as evidenced by its WTO move. This also allows China to expand its sphere of influence and attempt to lead the Global South alternative. “This new reality can hardly be managed without significant adjustments to the trade regime, so maintaining the status quo is no longer an option,” argues Ignacio García Bercero, senior researcher at the Elcano Royal Institute and European negotiator for the Transatlantic Trade and Investment Partnership (TTIP), in a recent paper.

India provides a clear example of how Trump’s aggressive tariff policy is pushing some of America’s allies toward Beijing or reinforcing their non-aligned positions. This illustrates what Elena Pisonero, Spain’s former Secretary of Commerce, calls the rise of intermediate actors in her recent book El espíritu del sherpa (In English, The Spirit of the Sherpa). These actors find unprecedented maneuvering space in this fragmented new landscape: “India maintains strategic alliances with the U.S. through the Quad [the informal Indo-Pacific alliance of India, Australia, Japan, and the U.S.], has robust trade relations with China, preserves historic ties with Russia, and develops energy partnerships with Gulf countries,” Pisonero notes. Similar positions are held by the Gulf monarchies, Turkey, and Vietnam.

In August, the White House announced 50% tariffs on a long list of Indian products in retaliation for its oil purchases from Russia. Far from backing down, New Delhi refused to negotiate “with a gun to our head.” The India-China rivalry is deep, and India’s cooling ties with Washington does not push the country directly into Beijing’s arms, but it does reinforce elements of a new global financial architecture — alternative investment and development banks, agreements to reduce dollar use in transactions among these countries, mechanisms to counter Western financial sanctions — that operates outside Western structures and is becoming increasingly difficult to dismantle. Slowly but unmistakably, the use of the renminbi is rising.

According to the Bank for International Settlements (BIS), 8.5% of foreign exchange transactions in April were conducted in Chinese currency, up from 7% three years earlier — an increase heavily influenced by Hong Kong’s stock activity. Around 30% of transactions with trade partners are already conducted in renminbi, 10 points higher than three years ago. “American unilateralism has exposed the costs of over-dependence on the U.S., providing China with a clear opportunity. Its simple message: at least we are consistent,” says Ian Bremmer, founder of Eurasia Group.

Economists at the World Economic Forum argue that these developments mean “the global economy is undergoing one of its most turbulent periods in decades, with a convergence of shocks and structural shifts rewriting the rules of growth, trade and governance.”

José Manuel Amor, partner at Analistas Financieros Internacionales (AFI), adds that this is not merely rising tension between blocs but a cyclical shift: “Globalization as we knew it is dissolving, and we are moving toward a multipolar world, with one still-dominant leader — the United States — tempted to exploit interdependence created over recent decades and needing to adapt to increasing pressure from other poles [China, BRICS, Global South]." In this new world, adaptation determines success.

But Beijing also faces its own weaknesses — diplomatic and economic. China has been unable to resolve the overcapacity in its economy, stemming from high domestic savings and low private consumption. This makes the giant more dependent on external demand — a third of its growth comes from exports — and fuels internal deflationary pressures, with prices in negative territory for five consecutive quarters. Neil Shearing, chief economist at Capital Economics, argues that the real problem for the global economy over the next five years is not import tariffs, which can indeed slow global trade growth, but China’s overcapacity.

Countries like Vietnam, Mexico, and India have benefited from the restructuring of global supply chains, particularly in sectors highly sensitive to cost increases from tariffs on China.

New markets

The escalation of the trade war with the U.S. has led China to redirect part of its exports toward other markets — and it has done so in record time. According to BNP Paribas Research, between April and July this year, Beijing reduced its exports to the United States by an average of 23% year-on-year. At the same time, its sales to the African continent increased by 34%, well above exports to Southeast Asian countries (17%) or to Europe (7%). This does not mean these regions suddenly developed an insatiable appetite for Chinese products; rather, many of these countries are being used by Chinese producers as an alternative route to reach the U.S. market and thereby avoid tariffs. This is known as the phenomenon of trade diversion through third countries.

However, China is beginning to face the limits of this strategy. After all, there is little added value in repackaging Chinese products and sending them to the U.S., and it does not create employment. There is also the added risk that any surplus generated by these operations in the U.S. trade balance could be penalized with higher tariffs.

Countries like Mexico are increasingly reluctant to serve as intermediaries for Chinese producers and are cautiously considering raising tariffs on Chinese packages from 19% to 33.5%. Chile, Ecuador, and Uruguay are moving in a similar direction. In Latin America, only Brazil — in response to U.S. tariffs on coffee — has openly pursued closer ties with Beijing. Others, like Argentina, clearly aligned with the current U.S. administration, are simply benefitting from an investment of nearly $7 billion in the so-called lithium triangle, which will make the country the world’s second-largest producer of this metal in 2025.

Production plants

“There is a tendency to view global trade entirely from a Western perspective. And yet the forces reshaping world trade today are coming less from Washington than from Beijing,” says Shearing. “China continues to invest in production plants beyond what its domestic market can absorb, making exports a survival mechanism for the giant. To offload this excess production, Chinese companies have been cutting prices, accumulating a 25% reduction since 2022, while export prices elsewhere have remained essentially flat,” he emphasizes.

As a result, despite the tariff escalation triggered by Trump’s arrival in the White House, China’s share of global exports had risen from 13% in 2018 to 18% by early 2025. This strategy comes at a high economic cost: approximately one in three Chinese manufacturers operates at a loss, which is fueling a structural slowdown in Chinese productivity. Beijing has launched measures to address its overcapacity through various campaigns, with limited results so far.

At the same time, the reduction in Chinese solar panel production costs has boosted solar energy production worldwide. Nothing in economics is ever simple.

In today’s fractured world, friends and alliances matter — and China has spent years cultivating them through the Belt and Road Initiative, its New Silk Road. Beijing has literally built roads, ports, digital networks, and parallel payment systems around the world. It has woven an alternative economic architecture, in which its companies, led by tech firms, provide everything from infrastructure to terminals enabling countries to participate in the digital economy.

Container ships at Qianwan terminal in Qingdao Port, Shandong, China, on October 24, 2025.COSTFOTO / NURPHOTO / GETTY IMAGES

Chinese financing for these projects is often tied to clauses that benefit state-owned enterprises, guarantee long-term contracts, or pave the way for preferential trade agreements. Some countries have fallen into debt traps, such as Ecuador, Zambia, and Sri Lanka, and have had to renegotiate terms or even turn to traditional development institutions like the World Bank for bailouts. Yet even these setbacks demonstrate the new balance: China is now both creditor and arbiter of the Global South’s solvency.

Power in the 21st century is no longer measured solely in aircraft carriers or missiles, but in routes, cables, and contracts. Geoeconomics is the continuation of geopolitics by other means. And China, more than any other actor, understands that those who finance the world’s infrastructure shape its future. Coinciding with the tariff crisis between Brasília and Washington, for example, the Lula da Silva government is planning a major railway connection to the Peruvian mega-port of Chancay on the Pacific, a project that would likely be backed by Chinese financing.

Today’s competition is not only between states, but also — and particularly — between companies. China leverages its tech giants — Huawei, ZTE, Alibaba, Tencent, ByteDance, and Baidu — as vectors of global influence. They have also challenged U.S. technological dominance. So much so that the U.S. Congress demanded the sale of the short-video platform TikTok, developed by ByteDance, or its total ban to prevent access to data from 150 million American users. Ultimately, in September, TikTok was sold to a group of investors close to the White House, with details discussed by Trump and Xi during their meeting in South Korea at the end of October.

A key player

Huawei, for its part, has become another essential element in this strategy, particularly in the development and deployment of 5G infrastructure — a field that defines technological competition in the 21st century. Its leadership in fifth-generation networks has allowed it to offer solutions that are both cheaper and more advanced than those of Western competitors, which has facilitated contracts worldwide. Washington has launched a campaign to exclude the Chinese tech giant from 5G networks in the U.S. and among its allies, even issuing ultimatums to some countries, such as Spain, that continue to work with Huawei, threatening to block their access to security information.

Trump and Xi have already agreed that their next meeting will take place in April 2026. The U.S. president has committed to traveling to Beijing, which in itself represents a diplomatic victory for the Asian country, which had been intent on avoiding a scenario like the one Ukrainian President Volodymyr Zelenskiy faced in the Oval Office last February. In a world undergoing such a radical systemic change, the scheduling of this meeting may well be the only certainty left standing by then.

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