If China can, the West is screwed. Oh Dear, China can, the West is screwed indeed. China is getting enough money from the to move on China's technology, the West does not have enough money even to start.
"China's exports are still going strong.
That has created tension with the West and led to a new wave of tariffs on its electric vehicles. But it is also reshaping global trade.
The question for Beijing is whether a pivot to the developing world will be enough to keep its export machine humming.
China's latest trade data released last week said a lot. Exports in May increased 7.6% from a year earlier in dollar terms, while imports rose 1.8%. The implosion of China's housing market has dragged down domestic demand, so Beijing has revved up its export engine to drive growth.
That has, however, caused much unease in Western capitals. The Biden administration has announced new tariffs of 100% on Chinese electric vehicles and a 25% tariff on Chinese EV batteries and parts.
On Wednesday, the European Commission unveiled new duties on Chinese EVs ranging from 17.4% to 38.1% following an antisubsidy investigation.
Some of the recent strong growth could be due to manufacturers trying to front-run potential trade restrictions. China's exports to the U.S., for example, rose 3.6% year over year in May, contrary to the trend of the past couple of years.
But overall, China has been selling less to the West and more to Southeast Asia and Latin America. Exports to Southeast Asia in the first five months of this year rose 12% from the same period two years earlier. Over the same time, China exported 17% less to the U.S.
This could be partly because Chinese companies are rerouting their trades through countries like Vietnam and Mexico, though those countries also have been building up lower-end manufacturing while China moved up the value chain.
China is also finding new markets. Exports to Russia have surged 70% over the past two years as Western sanctions cut the country off from much of its trade with others.
But more important, China is selling different types of products than before. New segments including EVs, batteries, solar panels and mature chips accounted for 8.5% of China's total exports last year, compared with 4.5% five years earlier, according to Morgan Stanley.
These exports have been met with a backlash in Europe and the U.S. since they are also trying to build up technologies necessary for the green transition and the rise of artificial intelligence.
Chinese goods with affordable prices might, however, be welcomed in many lower-income countries.
Southeast Asia is now a bigger destination for China's exports than the U.S. or the European Union. Southeast Asia and Latin America together have made up nearly one-quarter of China's exports so far this year, still smaller than the combined 29% share of the U.S. and the EU, but altogether a sizable market with good growth potential.
China's export pivot toward developing countries has worked out so far." [1]
Oh Dear...
1. Can China's Export Machine Keep Running Without the West? Wong, Jacky. Wall Street Journal, Eastern edition; New York, N.Y.. 13 June 2024: B.12.