China’s factory exports are powering ahead faster than almost anyone expected, putting jobs around the world in jeopardy and triggering a backlash that is gaining momentum.
From steel and cars to consumer electronics and solar panels, Chinese factories are finding more overseas buyers for goods. The world’s appetite for its goods is welcomed by China, which is enduring a severe downturn in what had been the economy’s biggest driver of growth: building and outfitting apartments. But other countries are increasingly concerned that China’s rise is coming partly at their expense and are starting to take action.
The European Union announced last week that it was preparing to charge tariffs, which are import taxes, on all electric cars arriving from China. The European Union said that it had found “substantial evidence” that Chinese government agencies have been illegally subsidizing these exports, something China denies.
The amount of the tariffs will not be set until summer but will apply to any electric car exported by China to the bloc from March 7 onward.
During a visit to Beijing in December, European leaders warned that China is compensating for its housing crisis by building far more factories than it needs.
China already produces a third of the world’s manufactured goods, more than the United States, Germany, Japan and South Korea combined, according to the United Nations Industrial Development Organization.
The European Union has also been mulling import restrictions on wind turbines and solar panels from China. India announced in September that it would impose broad tariffs on steel from China. Turkey has been complaining that China is lopsidedly sending it exports while buying little.
The Biden administration, which has kept former President Donald Trump’s tariffs in place, has imposed an ever-lengthening list of restrictions on American high-tech exports.
“I’ve made sure that the most advanced American technologies can’t be used in China, not allowing to trade them there,” President Joe Biden said in his State of the Union address on Thursday.
China’s exports, measured in dollars, rose 7% in January and February over last year. But falling prices for many Chinese products — because of a glut of output in China — mean that the quantity of exports and their global market share are rising much faster.
China has found ways to bypass some tariffs. Chinese components go in rising volumes to countries like Vietnam, Malaysia and Mexico. These countries process the goods, so that they count as their own products and not as made in China. These countries then ship the goods to the United States and European Union, which charge them low tariffs or even no tariffs.
The United States and European Union are becoming concerned.
Katherine Tai, the US trade representative, warned last week in comments at a Brookings Institution event that the US-Mexico-Canada Agreement, which replaced NAFTA, was up for review in the summer of 2026. She hinted that the United States might insist on tightening rules on the origin of components, notably for cars — a position also espoused in autumn by Robert E Lighthizer, who was Trump’s trade representative and is now the leading trade adviser to Trump’s election campaign.
China “already is a really important element of tension and concern” in North American trade relations, Tai said.
In addition to looming tariffs on imported clean energy products, Europe will soon phase in a tax on imports from all over the world based on the quantity of climate-changing carbon dioxide emitted during their production.
The new tax is known as a carbon border adjustment mechanism, or CBAM. But it has been nicknamed the “C-bomb” in Europe because it will fall heavily on imports that come directly or indirectly from China. Two-thirds of the electricity in China is generated by burning heavily polluting coal, which means many of its exports to Europe could be hit with the new tax.
Europe and the United States also face threats from China to their long-standing economic relationships in developing countries, which increasingly choose cheaper Chinese goods. Across much of Latin America and Africa, countries now buy more from China than nearby industrial democracies, and the United States and Europe can do little about it.
“There are no rules to stop dumped and subsidized products from undercutting your exports to the rest of the world,” said Susan C Schwab, who was the US trade representative under President George W. Bush.
For their part, Chinese officials expressed concern during the annual session of the country’s legislature, which ended Monday, about what they perceive as a wave of unfair protectionism. Commerce Minister Wang Wentao cited a recent International Monetary Fund study that found the number of trade restrictions around the world had nearly tripled in the past four years, many of them aimed at China.
Foreign trade officials and economists generally cite three aspects of China’s industrial policy that help exports. State banks give loans for factories at low interest rates. Cities transfer public land for factory construction at little or no cost. And the state electricity grid keeps prices low.
According to China’s central bank, new lending for industry soared to $670 billion last year from $83 billion in 2019. By contrast, net lending for real estate was $800 billion in 2019 but shrank $75 billion last year, as mortgages and other real estate loans were repaid faster than new loans were issued.
Zheng Shanjie, China’s top economic planner, reaffirmed China’s industrial policy Wednesday, saying that “land and energy will be channeled to good projects.”
China’s explosion in exports is visible in its trade surplus in manufactured goods, which is the largest the world has seen since World War II.
Those surpluses correspond to deficits in other countries, which can be a drag on their growth.
The widening surplus is not only about rising exports. China has reduced or stopped buying many manufactured goods from the West as part of a series of national security and economic development measures over the past two decades.
Western economists, and even some economists in China, have been calling for China to do more to help consumers instead of increasing factory output. Premier Li Qiang, China’s second-highest official after Xi Jinping, told the legislature in his annual speech last week that he would move in that direction, but his steps were small.
He said that China would raise minimum government pensions for seniors, for example, but only by $3 a month. That would cost less than a tenth of a percent of the country’s economic output. — The New York Times.
Oman Observer is now on the WhatsApp channel. Click here
