# Interview with Chongquan: Challenges in US-China Relations Are Escalating from Tariff Level to "Systemic Competition," Requiring Preparation for a "Protracted War"

Daily Economic News Reporter | Zhang Huaisui
Daily Economic News Editor | Dong Xing Sheng

On March 5th, the Fourth Session of the 14th National People’s Congress opened at the Great Hall of the People in Beijing. This year’s “Government Work Report” (hereinafter referred to as the Report) continues to prioritize expanding domestic demand as the top focus of economic work through 2026.

The report states that adhering to demand-driven growth, coordinating consumption promotion and investment expansion, and exploring new space for domestic demand growth will better leverage China’s super-large market advantage.

Meanwhile, in deploying the main goals and major tasks for the “14th Five-Year Plan” period, the report also emphasizes that, in the face of complex and severe external environments, it is essential to uphold the strategy of expanding domestic demand as a fundamental policy. Combining efforts to benefit people’s livelihoods, promote consumption, and invest in both physical assets and human capital, the government aims to vigorously boost consumption, significantly increase the resident consumption rate, and expand effective investment.

This indicates that expanding domestic demand will become the main engine driving economic growth over the next five years.

Under the policy backdrop of “demand-led” growth, what roles will the “three engines” of economic growth—consumption, investment, and exports—play by 2026? How will issues of weak consumer and investor confidence be addressed? What is the trend of foreign trade exports this year? How are the risks and opportunities reflected in these areas?

Focusing on these questions, during the National Two Sessions, the Daily Economic News (NBD) conducted an exclusive interview with Chong Quan, former member of the Party Leadership Group of the Ministry of Commerce, former Deputy Representative for International Trade Negotiations at the Ministry of Commerce, and former President of the China WTO Research Institute.

Chong Quan has made significant contributions in bilateral and multilateral trade negotiations, WTO dispute resolution, and anti-monopoly areas, playing a key role in safeguarding national economic interests and promoting fair trade.

1

China’s export growth is expected to reach about 5% in 2026

NBD: 2026 marks the start of the “14th Five-Year Plan.” How do you view the current “confidence bottleneck” facing China’s economy? How does this “bottleneck” compare to the period before China joined the WTO?

Chong Quan: First, from a macroeconomic perspective, China’s economic “stability” remains evident. The structure of primary, secondary, and tertiary industries continues to optimize, showing a balanced and coordinated development pattern. From the demand side, in 2025, the “three engines”—final consumption expenditure, gross capital formation, and net exports of goods and services—contributed 2.6, 0.8, and 1.6 percentage points respectively to GDP growth, with ongoing structural improvements and a further consolidation of the main role of domestic demand. This fully demonstrates that China’s long-term positive economic fundamentals have not changed, and the characteristics of strong resilience, large potential, and sufficient vitality remain.

Regarding the current “confidence bottleneck,” I see it more as a reflection of the profound transformation phase and the challenges brought by complex external changes.

First, structural contradictions on both supply and demand sides are prominent. Currently, “strong supply, weak demand” is a notable feature, with domestic effective demand insufficient, and the momentum for recovery in consumption and investment needing further stimulation. Residents’ willingness and ability to consume need to be further activated, and the tendency for precautionary savings has increased, indicating that restoring market confidence is a gradual process.

Second, the profound and complex external environment is evolving rapidly. The world is experiencing a once-in-a-century shift, with unilateralism and protectionism on the rise, and global industrial and supply chains undergoing deep adjustments. This structural squeeze has significantly reduced the space for China’s previous reliance on the “external at both ends” international cycle, and external demand uncertainty has increased markedly.

At the same time, we face the “growing pains” of transitioning from old to new kinetic energy. In the pursuit of high-quality development, we are undergoing a profound shift in driving forces. Some traditional industries face overcapacity adjustments, the real estate market is transitioning to new development models, and local fiscal and debt balances are under pressure. These “subtractions” during the transformation process may temporarily impact market expectations and confidence.

Before joining the WTO, China’s main contradictions were insufficient production capacity and capital. The “bottleneck” then was how to break through barriers and integrate into the global economy. After joining the WTO, China successfully integrated into the international cycle, forming a pattern of “two markets, two resources,” leveraging external demand to unleash domestic production potential.

Today, China has become the world’s second-largest economy and largest trading nation, with a complete modern industrial system and the advantage of a super-large market. The current “bottleneck” is not about insufficient production capacity but about how to achieve a dynamic balance between supply and demand at a higher level and realize self-reliance and strength amid complex environments.

NBD: The government work report places the leading role of domestic demand at the top of economic priorities. Does this mean that the importance of exports has decreased? What roles will the “three engines” play in driving economic growth in 2026?

Chong Quan: Currently, the global geopolitical landscape is undergoing profound adjustments. The acceleration of technological revolutions, exemplified by AI, and the increasing challenges posed by climate change are reshaping the world trade pattern in unprecedented ways.

Meanwhile, a notable fact is that in 2025, China’s trade surplus exceeded 1 trillion USD. This has attracted global attention, but more importantly, it reflects a deeper meaning—China has shifted from a trade giant to a trade power. This not only confirms the correctness of the export-oriented development strategy since reform and opening up, especially after joining the WTO, but also signifies a qualitative leap in China’s international competitiveness.

In this context, understanding “demand-led” growth, we must recognize that emphasizing domestic demand does not mean exports are no longer important.

The reason for prioritizing domestic demand is that, at this new stage of development, building a strong domestic market and making good use of our large-scale market advantage are essential to consolidating economic foundations and coping with external uncertainties. From advancing the construction of a unified national market to optimizing consumption supply and stimulating consumption potential, all policy measures aim to make domestic demand a “stabilizer” and “ballast” for economic growth.

Looking ahead to 2026, the “three engines” will play different but mutually supportive roles.

First, consumption will continue to serve as the fundamental driver. Currently, China’s consumption structure is undergoing profound changes—from being mainly goods-based to a balanced mix of goods and services. The growth potential of service consumption, especially in cultural tourism, health and wellness, and digital services, is accelerating. This means that the support from domestic demand will become more diverse and sustainable.

Second, exports are expected to maintain strong resilience. Predictions suggest that China’s export growth in 2026 could reach about 5%, continuing to outpace overall economic growth. This is supported by a gradual recovery in global industrial production, providing strong backing for exports of intermediate and capital goods. Meanwhile, China’s export structure is shifting from goods to services, with knowledge-intensive service exports becoming a new growth pole. The “quality leap” of exports will become more evident.

Images source: Qingbai River District Publicity Department

Third, investment structure will continue to optimize. This year, the focus of investment is shifting from traditional scale expansion to a deep integration of “investment in physical assets” and “investment in people.” High-quality urban renewal, increasing social welfare-related investments, and effectively stimulating private sector investment will be key highlights. Although fixed asset investment growth may slow to around 1%, the investment structure will be more optimized, with higher efficiency and closer ties to people’s well-being.

2

The integration of “Digital + Culture” will open new space for service trade

NBD: You just mentioned that exports will remain resilient in 2026. How do you forecast the foreign trade situation this year? Where are the risks and opportunities?

Chong Quan: My basic judgment for 2026 is that, although external environment complexities, severity, and uncertainties will increase, China’s foreign trade still has conditions to maintain resilience, with export growth expected to stay within a reasonable range, close to 2025 levels.

It is important to note that the focus of foreign trade policy is undergoing profound adjustment—from past emphasis on scale expansion to safeguarding the integrity of the industrial system and seeking continuous upgrading under increasing external pressures. This is a more strategic and determined policy orientation.

The “risk” side mainly lies in the profound changes in the external environment. First, external demand faces significant uncertainty. WTO forecasts that global merchandise trade volume growth in 2026 may slow from 2.4% in 2025 to about 0.5%. Global economic growth momentum weakens, and the pressure for external demand contraction cannot be underestimated.

Second, geopolitical risks continue to ferment. Regional conflicts, major power rivalries, and other factors not only disrupt trade logistics but also increase risks in cross-border payments and financial settlements, challenging trade stability.

Third, protectionism is escalating. From targeted tariffs in the past, protectionism is extending to comprehensive restrictions along entire supply chains. Some countries, under the guise of “de-risking,” are pushing rule barriers, technological blockades, and investment reviews, raising the risk of decoupling and supply chain disconnection to higher levels.

The “opportunity” side lies in the structural adjustment and kinetic energy conversion of China’s foreign trade. First, trade partner diversification continues. Recently, exports to ASEAN, Africa, and Belt and Road countries have steadily increased, deepening economic and trade cooperation with “Global South” countries. This diversification enhances resilience against demand fluctuations in developed economies.

Second, export structure is accelerating upgrading. From “the three new” (new energy vehicles, lithium batteries, photovoltaic products) to high-end electromechanical equipment, China’s share of technology-intensive products in global markets continues to rise. Meanwhile, knowledge-intensive service exports are becoming a new growth engine, with the potential of service trade accelerating. This indicates China is moving up the value chain in manufacturing.

Third, new formats like cross-border e-commerce are growing rapidly. With its flexibility, efficiency, and direct reach to consumers, cross-border e-commerce is becoming an important force in stabilizing foreign trade. In 2026, China’s cross-border e-commerce import and export scale is expected to surpass 3.2 trillion yuan, further contributing to foreign trade resilience.

Additionally, the institutional benefits of Hainan Free Trade Port’s operation are gradually being released. Hainan is becoming a new open testing ground for attracting export-oriented industries. This innovation may explore new paths for China to align with high-standard international trade rules and inject new vitality into foreign trade.

Images source: Daily Economic News Zhang Jian

Viewing “risk” and “opportunity” together, an important opportunity now is that global demand for Chinese products, especially for “the three new” and other technology-intensive products, remains strong. This not only reflects the achievements of China’s industrial upgrading but also provides strong support for sustained foreign trade growth.

NBD: The “14th Five-Year Plan” recommends expanding high-level opening-up, with a focus on “expanding market access for the service sector.” Compared to goods trade, what are the potential advantages of service trade?

Chong Quan: The “14th Five-Year Plan” explicitly proposes “focusing on expanding market access for the service sector,” which is a strategic deployment of great significance. To understand this, we first need to recognize a basic fact: if the main channel for China’s integration into the world in the past decades was goods trade, then in the coming period, service trade will become the “new engine” and “main battlefield” of high-level opening-up.

Compared to goods trade, the potential of service trade is reflected in multiple dimensions. First, the broad space for knowledge-intensive service exports. Currently, China’s knowledge-intensive service exports still lag behind major service trade powers like the US and UK, especially in high value-added areas such as finance, legal, consulting, and intellectual property. There is considerable room to improve market share and influence in the international arena. This gap also represents potential. With the enhancement of domestic professional service capabilities and accelerated internationalization, knowledge-intensive services are fully capable of becoming a new growth driver for foreign trade.

Second, digital trade is emerging as a new engine. In recent years, China’s telecommunications, computing, and information services exports have maintained rapid growth, and digital services are expanding overseas at an accelerated pace. Notably, digital cultural products like online literature, online games, short videos, and online dramas are popular in overseas markets, and the cultural influence of “Chinese流” (Chinese style) is transforming into tangible service exports. This “digital + culture” integration opens up a whole new space for service trade.

At the same time, inbound tourism has huge potential, and the service trade deficit is expected to continue narrowing. For a long time, tourism services have been the main source of China’s service trade deficit. But recent developments—such as expanded visa-free policies, improved cross-border payment facilitation, and the strengthening of “China Tours” branding—are leading to a rapid recovery and strong growth in inbound tourism.

Finally, high-end services like finance, legal, and intellectual property services still have untapped internationalization potential. These are core components of modern services and high ground in global service trade competition. As China’s service marketization, rule of law, and internationalization levels continue to improve, the export of high value-added services is expected to gradually open up.

3

Challenges in China-U.S. relations

From tariff escalation to “systemic competition”

NBD: You recently mentioned in a speech that “China-U.S. rivalry and global governance” are interconnected. Focusing on 2026, are the challenges mainly about tariffs, or are they deeper, involving “rules and system” containment? During the “14th Five-Year Plan,” how do you think we should build a “bottom-line thinking” approach to China-U.S. relations?

Chong Quan: China-U.S. relations are among the most important bilateral relations in the world today. Their trajectory not only concerns the well-being of both peoples but also profoundly influences the global landscape. First, we need to recognize a fundamental change: China-U.S. economic and trade relations have been a relationship of mutual dependence from the outset. After the U.S. launched the trade war and implemented containment policies, the degree of interdependence has decreased year by year, undergoing profound adjustments.

Data from the General Administration of Customs show that in 2025, China’s import and export volume with the U.S. was 4.01 trillion yuan, accounting for 8.8% of China’s total trade. This figure is disproportionately small relative to the size of the two economies and results in efficiency losses and higher costs for both sides. Although this change was initiated by the U.S., and China responded passively, it has become a premise we must face when planning China-U.S. relations.

Against this background, the challenges in China-U.S. relations in 2026 are no longer just about tariffs but have escalated into deeper “rules and system” competition.

We should see that U.S. policy toward China is shifting from indirect trade measures to more direct, fundamental technological restrictions. The U.S. continues to tighten controls on key frontier areas such as semiconductors, AI, and quantum computing, attempting to slow China’s innovation through technological blockade. This means the competition has moved from market and product levels into the realm of core technology and innovation roots.

Images source: Daily Economic News Media Library

In facing these challenges, the “bottom-line thinking” during the “14th Five-Year Plan” should be summarized as: be prepared for a “protracted war,” strengthen internal capabilities, and unwaveringly do well our own work—making the real economy stronger, better, and bigger, and continuously enhancing independent innovation.

In terms of implementation, I believe the first step is to tackle core technologies—focusing on breakthroughs in “choke points.” We need to reinforce national strategic science and technology strength in key areas like semiconductors, AI, high-end software, and biomedicine, leveraging the advantages of the new national system, while stimulating market entities’ innovation vitality, aiming for strategic breakthroughs during the period.

Second, diversify the industrial chain layout and deepen pragmatic cooperation with “Global South” and Belt and Road countries. Building a more diversified and resilient supply chain network can reduce dependence on single markets and safeguard industrial chain security through openness.

Third, control strategic resources by accelerating the integration and technological upgrading of critical minerals like rare earths. Transform resource advantages into industrial and rule-making power, establishing effective countermeasures in key areas.

Meanwhile, give full play to the role of “specialized, refined, and innovative” small and medium-sized enterprises and “little giants.” These enterprises are the capillaries and vitality sources of a manufacturing powerhouse. Creating a better environment for their development will help more “hidden champions” emerge in niche fields.

Reporter | Zhang Huaisui
Editor | Dong Xing Sheng