How can China shield its public from the effects of a trade war? I found an interesting read in the NYTimes today. It read:


  The Chinese government also has much greater control over the economy, allowing it to shield the public from job cuts or factory closings by ordering banks to support industries suffering from American tariffs. It can spread the pain of a trade war while tolerating years of losses from state-run companies that dominate major sectors of the economy. 


I could not understand what that meant. Could anybody explain it?
Barry Naughton is an authority on the Chinese economy. He offers evidence on China's government control over the economy in a nice paper called "Is China Socialist?"

China's government controls an unusually large proportion of national income flows. He argues that these income streams have grown dramatically as a share of GDP since the mid-1990s. He shows how the Chinese  government steers  the  economy  because it sees a strong economic performance as a core part of its political legitimacy. China's government has some tools to "shield the public from job cuts or factory closings" because of American tariffs. 

Beyond the tools of funding direct government programs and ownership, the Chinese system has two distinctive mechanisms through which it attempts to foster development: 


a set of bureaucratic incentives that reward officials for growth (of GDP and revenue); 
planning that is centered on the national-level Five-Year Plans that propose a certain trajectory for growth.


Chinese Government's Control over National Income



The above Figure illustrates an expanded concept of government revenues that includes four main components: 


budgetary revenues (not including social security);  
social insurance  premiums;  
land  revenues;  
net  income from  state-owned enterprises.


These four components help Naughton providing an index of government control of resources, which tripled as a share of GDP between 1996 and 2013. This index gives an indication of the overall size of the Chinese government. For instance, all land in China is publicly owned: urban land is owned by the state, and housing is "privately owned" only in the sense that households hold long-term leases, typically of 50–70 years. The  financial system  in  particular is overwhelmingly dominated by the state-owned banks, which generate substantial profits.  

Summing all four components, the Chinese government had direct or indirect control  of  38%  of  GDP  in  2015.  Overall,  the  Chinese  government  is  large,  well-resourced,  and  potentially  highly  intrusive.  This  is  both a  distinctive  feature  of the Chinese economy in comparative context, and a dramatic change from the China of 20 years ago.