Will China's manufacturing juggernaut run out of road?

Faced with weak demand at home and the threat of tariffs abroad, Beijing is under pressure to rethink its export-driven model.

- Joe Leahy, Tina Hu and Chan Ho-him

Exporters normally do not welcome news of tariffs. But in the southern Chinese manufacturing heartland of Foshan, Donald Trump's threat in late November to impose an additional 10 per cent tax on imports from China was greeted with relief.

Trump had vowed earlier in his re-election campaign to levy 60 per cent tariffs on Chinese imports, a level that would have hit Foshan's producers of home appliances and fittings hard.

"If it really was going to be 60 per cent on top of the previous tariffs, then that would be really disastrous for made-in-China products going to the US," says Mr Ken Huo, supervisor at Foshan Foreign Trade Association. But 10 per cent, even if it is imposed as soon as Trump takes office on Jan 20, looks manageable by comparison.

Trump's return to the White House will pose one of the sternest tests yet for China's manufacturing and export sector, which in just two decades has become the world's most formidable industrial machine.

As domestic demand suffers from a deep property slump, Beijing is increasingly dependent on export industries to prop up the world's second-largest economy.

Advanced manufacturing is also at the core of President Xi Jinping's longer-term strategy for China. His vision of "national rejuvenation-restoring China to what the Communist Party sees as its rightful global pre-eminence depends on ending its reliance on Western technology and manufacturing.

Mr Xi's government is redirecting investments away from real estate and infrastructure into advanced industries. As domestic wages and profits stagnate, this is supercharging the price competitiveness of the country's exports on international markets and scaring those including the US that are already running large trade deficits with China.