THE ECONOMIST: Will Trump’s Chinese market hype prove itself a paper tiger?

American companies should be celebrating. China is on the verge of a grand opening of its markets to them, claims Donald Trump.

The President’s meetings in Beijing in May with China’s supreme ruler, Xi Jinping, yielded such a promise: it is just waiting to be “papered”.

This is the difficult part, Mr Trump admits. He may be hoping for that — and more — when he meets Mr Xi again in Washington on September 24.

Officials sounded positive after pre-summit talks on September 20, at which the two sides formalised a “board of trade”, proposed by the leaders in May, to identify possible tariff cuts.

It is not all rhetoric. Citigroup, one of America’s biggest banks, may soon open a fully owned brokerage in China (it helped that Dame Jane Fraser, Citi’s chief executive, was among the bosses accompanying Mr Trump to Beijing).

A survey published on September 10 by the American Chamber of Commerce in Shanghai finds American firms at their most optimistic about their prospects in China since 2021; profitability is also edging up.

A handful of big chipmakers, including Nvidia and Qualcomm, pushed American companies’ revenues in China to a record high last year.

This year Ralph Lauren, an upmarket fashion brand, and Sam’s Club, a members-only retailer owned by Walmart, have been among those making a killing.

For American bosses, pleasantries between Messrs Trump and Xi have eased fears of another all-out trade war.

Since May, China has pressed ahead with its promised purchases of soyabeans from America. And higher revenues are great if you can get them.

Yet most executives at American firms in Beijing and Shanghai are hardly upbeat. The improved confidence reported by the Shanghai chamber followed four years of record lows.

One reason for the foul business sentiment is that, for all the leaders’ smiles, the political mood remains dark. Both sides continue to threaten new sanctions and tariffs.

In the run-up to the Washington meeting Mr Trump has proposed a 7.5 per cent tariff on Chinese goods, on top of the 20 per cent-plus they already bear. (Chinese exports worldwide surged by 25 per cent year on year in August.)

American officials are reportedly devising new restrictions on purchases of Chinese tech gear, such as optical data transceivers.

Meanwhile, some Chinese suppliers of rare earths have mysteriously stopped supplying American customers despite having official permission to do so.

Chinese officials have also rebuffed American efforts to isolate Iran during the Gulf war. When it comes to solving these problems, “negativity prevails,” says an American corporate insider in Beijing.

“But maybe that’s what ‘constructive strategic stability’ looks and feels like.”

The phrase has been used by both American and Chinese officials to describe the relationship since May’s meeting.

A second problem is that access to Chinese markets, even if it comes, might not amount to much.

Google, Meta, Netflix and others have spent years trying to crack China’s internet economy.

In Chinese eyes, industries such as online search, social media and video streaming are already open to those willing to abide by Chinese laws — which entail employing censors and deleting or freezing accounts without explanation.

With China tightening its controls on free expression, there seems to be little hope of much change.

In other potential markets Americans are late to the game. Before China’s accession to the World Trade Organisation in 2001 the central government could have removed huge obstacles for American businesses, says Randall Schriver, chairman of the US-China Economic and Security Review Commission, a bipartisan body set up by Congress.

Since then American leverage has diminished. In financial services, for example, China was supposed to allow foreign firms to expand as part of its WTO obligations.

But local authorities stalled on granting licences to firms such as Visa and MasterCard, the West’s leading payment-processors.

Instead Chinese payments are dominated by domestic tech champions like Ant Group and Tencent.

Today, says Mr Schriver, no American president can do much about such local competition.

Another problem Mr Trump can do little about is persistently thin returns on new investments. A few companies’ record revenues do not tell the full story: most American firms’ sales in China have stagnated since 2023 (see chart). For some, the slide began sooner. Apple’s sales in China last year were the biggest of any American company, but were roughly $10bn smaller than in 2022. In the past four years PepsiCo, a maker of drinks and snacks, has watched its sales level off and then fall.

For some companies this has become a matter of choice. Because returns are low, they have decided to stop investing in China and are shrinking their operations.

That reflects not just fierce local competition but also the sluggishness of the economy. With money tighter, consumers are increasingly stingy.

Markets once considered the future of China’s consumer economy, such as high-end medical services, now look much less promising, even as they open to foreign companies.

American health-care groups now question why they would deploy scarce resources, such as doctors, in China when returns are higher elsewhere, says Joe Ngai, the local head of McKinsey, a consulting firm.

The semiconductor industry is the brightest spot. Among American firms that report full-year sales in China, chipmakers contributed more than a third of last year’s total.

Their revenue grew by 9 per cent in 2025, making them the bedrock of American business in China.

But this is also the market most at risk. The rapid rise of advanced hardware sales reflects the emergence of China’s artificial-intelligence industry — and also well-founded fears among Chinese firms that supplies will be cut off: both Mr Trump and Joe Biden banned sales of high-performance chips and other gear.

Allowing exports of such chips looks hard to square with Mr Trump’s insistence on winning the AI race with China.

If American resistance to selling the tech were the only obstacle, it might be overcome in discussions between Mr Xi and Mr Trump, who is eager to announce big deals intended to lower his country’s trade deficit with China.

But it is Mr Xi’s desire to keep the most advanced American parts out of China’s AI systems.

China’s industrial policy now revolves around the concept of self-sufficiency in chips.

That goal remains far away, but one route to it has been to block Chinese companies from buying Nvidia’s chips and other American components while spending heavily on home-made ones.

This project is moving quickly. In 2020 just 6 per cent of the equipment used in wafer fabrication was domestically suppliable; by the end of this year that share may be close to 30 per cent.

The talks in Washington may buy American companies some time, but for Mr Xi self-sufficiency is, in the end, not negotiable.

It is possible that Mr Trump’s version of an open China is simply one that buys more corn and soyabeans from America, notes Ker Gibbs of the University of San Francisco, a former executive in China.

The President’s aims for the meeting could be to announce more headline deals on big-ticket items, such as Boeing jets — anything to help him claim he has pushed down the bilateral deficit.

If that also means fewer tariffs and sanctions, America’s bosses will take any relief they can get. But expectations for better days and bigger sales remain low.