China has another lever to pull in face-off with Trump

In Washington, China hawks say its economy is too weak to withstand a tariff shock. In the city of Yiwu, factories are showing why, for now, that may be a miscalculation, writes Alexandra Stevenson from Yiwu, China

- Alexandra Stevenson

Gong Hao, like many Yiwu vendors, has lost many customers from the United States and sought new buyers in Europe and Southeast Asia this year.

With trade hostilities between the world's two economic superpowers back on, China has sent the unmistakable message that it is ready to fight.

A week ago, it invoked its grip over virtually the entire world's supply of critical materials, breaking a delicate trade détente between the two countries.

Beijing feels it has another ace card: its booming factories. Even in the face of sky-high tariffs by President Trump, China's manufacturing sector is helping to maintain growth and give the country's top leader, Xi Jinping, a stronger hand to face down the United States.

The strength is on display in the city of Yiwu, home of the world's biggest wholesale market, where sellers peddling toys, home electronics and drones are stuffed into complexes that span multiple city blocks. Last week, Yiwu unveiled another trade centre, a facility the size of hundreds of football fields to house exporters and "showcase China's hardcore manufacturing power to the world."

Like many vendors in Yiwu, Gong Hao used to sell his plastic Hawaiian leis, party streamers and bunny ears to Americans. This year, he lost his US customers but gained new buyers in Europe and Southeast Asia.

"American customers have little impact on us," Mr Gong said.

China's factory prowess, helped by the government, is part of a tectonic shift taking place in the economy and hitting shores near and far as China sends more of what it makes to more places. Its trade surplus with the world this year — over $875 billion — is marching towards a record. Those exports accounted for as much as one third of China's economic growth over the past year, a development that experts say will be hard to sustain.