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How Beijing could be creating China shock 2.0
Now, China is targeting three new strategic industries that the rest of the world is also eyeing.
This time, though, Western countries aren't letting Beijing get its way so easily — especially since China is aiming to develop its own supply-chain ecosystem in these areas.
"The advanced economies are facing the combined impact of China's moderating medium-term GDP growth on global demand as well as competition from China's new wave of industrialization," Rajiv Biswas, an international economist who's the author of "Asian Megatrends," told Business Insider.
This development doesn't stem only from China's push into manufacturing the end products in the fields of EVs, lithium-ion batteries, and solar cells. The country is also developing global supply chains for critical raw materials, such as rare earths, that are set to supply these industries.
"Consequently, the industrial economies of the OECD nations are facing new economic challenges from China's strategic competition in these key growth industries," Biswas said.
Such competition is even keener now because of deflation in China — which has become the only major economy in the world dealing with negative consumer prices.
China's slowing economic growth also means it's not buying as much from other countries, ratcheting up trade tensions.
Last year, China's imports of goods from the rest of the world fell by 5.5% from a year ago, official data shows.
What are the US and the rest of the world doing about China shock 2.0?
The world isn't going to be caught flat-footed by China's emerging dominance in hot new industries this time.
"It is likely that strategic competition between the US, European Union, and China will continue in the long-term in areas of advanced manufacturing technologies," Biswas said.
Many companies are already diversifying supply chains away from China for a range of products.
The US is taking steps to boost chip manufacturing at home. The CHIPS Act provides $52 billion in subsidies for production, research, and workforce development. The US Inflation Reduction Act is also boosting investment in clean energy.
On Tuesday, the Department of Energy announced a $75 million investment to develop a research facility to strengthen the domestic supply chains of critical minerals.
US Treasury Secretary Janet Yellen is meanwhile in China for meetings with top Chinese officials. The Treasury said in a press release announcing her visit that she would be "pressing Chinese counterparts on unfair trade practices and underscoring the global economic consequences of Chinese industrial overcapacity."
At a Suniva solar-cell plant in Georgia on March 27, Yellen said she was "concerned about global spillovers from the excess capacity that we are seeing in China" that have now hit new energy industries such as solar, electric vehicles, and lithium-ion batteries.
The EU, too, is taking steps to protect its domestic manufacturing in emerging key industries.
In October, the European Commission launched a probe into whether EV imports from China benefited from illegal subsidization that, in turn, threatens to damage the EU's EV manufacturers. If this is found to be true, the EU could impose tariffs on these imports. The EU investigation is ongoing.
The EU has also established the European Chips Act to boost domestic chip production.
After all, it's once bitten, twice shy.
"People like me grew up with the view: If people send you cheap goods, you should send a thank-you note. That's what standard economics basically says," Yellen told The Wall Street Journal in an interview published Wednesday. "I would never ever again say, 'Send a thank-you note.'"
What is China's response to the West's moves?
China is framing the US response as a move to contain its growth.
"The US side has adopted a string of measures to suppress China's trade and technology development," Wang Wenbin, a spokesperson for the Chinese foreign ministry, said at a regular press conference on Wednesday.
"This is not 'de-risking,' but creating risks. These are typical non-market practices," Wang added.
He also said China's exports of EVs, lithium-ion batteries, and solar cells had risen because of the "international division of labor and market demand" thanks to the global energy transition to more sustainable energy sources.
Biswas, the economist, said China was also de-risking by increasingly trading with Southeast Asia, where there's a burgeoning middle class. He said other large developing markets China was targeting included Africa and Latin America.
Last year, China exported more goods to Southeast Asia than to the US for the first time ever, according to a Bloomberg analysis of Chinese customs data published in January — signaling a change in global trade flows amid the changing geopolitical landscape.
Nomura economists wrote in a note on March 15 that the campaign season for the US presidential election this year was likely to heat up some trade issues.
They said: "We reckon China's export price deflation and overcapacity in a number of strategically important sectors might cause trade tensions to escalate later this year, and possibly beyond."
Read the original article on Business Insider
www.yahoo.com
Now, China is targeting three new strategic industries that the rest of the world is also eyeing.
This time, though, Western countries aren't letting Beijing get its way so easily — especially since China is aiming to develop its own supply-chain ecosystem in these areas.
"The advanced economies are facing the combined impact of China's moderating medium-term GDP growth on global demand as well as competition from China's new wave of industrialization," Rajiv Biswas, an international economist who's the author of "Asian Megatrends," told Business Insider.
This development doesn't stem only from China's push into manufacturing the end products in the fields of EVs, lithium-ion batteries, and solar cells. The country is also developing global supply chains for critical raw materials, such as rare earths, that are set to supply these industries.
"Consequently, the industrial economies of the OECD nations are facing new economic challenges from China's strategic competition in these key growth industries," Biswas said.
Such competition is even keener now because of deflation in China — which has become the only major economy in the world dealing with negative consumer prices.
China's slowing economic growth also means it's not buying as much from other countries, ratcheting up trade tensions.
Last year, China's imports of goods from the rest of the world fell by 5.5% from a year ago, official data shows.
What are the US and the rest of the world doing about China shock 2.0?
The world isn't going to be caught flat-footed by China's emerging dominance in hot new industries this time.
"It is likely that strategic competition between the US, European Union, and China will continue in the long-term in areas of advanced manufacturing technologies," Biswas said.
Many companies are already diversifying supply chains away from China for a range of products.
The US is taking steps to boost chip manufacturing at home. The CHIPS Act provides $52 billion in subsidies for production, research, and workforce development. The US Inflation Reduction Act is also boosting investment in clean energy.
On Tuesday, the Department of Energy announced a $75 million investment to develop a research facility to strengthen the domestic supply chains of critical minerals.
US Treasury Secretary Janet Yellen is meanwhile in China for meetings with top Chinese officials. The Treasury said in a press release announcing her visit that she would be "pressing Chinese counterparts on unfair trade practices and underscoring the global economic consequences of Chinese industrial overcapacity."
At a Suniva solar-cell plant in Georgia on March 27, Yellen said she was "concerned about global spillovers from the excess capacity that we are seeing in China" that have now hit new energy industries such as solar, electric vehicles, and lithium-ion batteries.
The EU, too, is taking steps to protect its domestic manufacturing in emerging key industries.
In October, the European Commission launched a probe into whether EV imports from China benefited from illegal subsidization that, in turn, threatens to damage the EU's EV manufacturers. If this is found to be true, the EU could impose tariffs on these imports. The EU investigation is ongoing.
The EU has also established the European Chips Act to boost domestic chip production.
After all, it's once bitten, twice shy.
"People like me grew up with the view: If people send you cheap goods, you should send a thank-you note. That's what standard economics basically says," Yellen told The Wall Street Journal in an interview published Wednesday. "I would never ever again say, 'Send a thank-you note.'"
What is China's response to the West's moves?
China is framing the US response as a move to contain its growth.
"The US side has adopted a string of measures to suppress China's trade and technology development," Wang Wenbin, a spokesperson for the Chinese foreign ministry, said at a regular press conference on Wednesday.
"This is not 'de-risking,' but creating risks. These are typical non-market practices," Wang added.
He also said China's exports of EVs, lithium-ion batteries, and solar cells had risen because of the "international division of labor and market demand" thanks to the global energy transition to more sustainable energy sources.
Biswas, the economist, said China was also de-risking by increasingly trading with Southeast Asia, where there's a burgeoning middle class. He said other large developing markets China was targeting included Africa and Latin America.
Last year, China exported more goods to Southeast Asia than to the US for the first time ever, according to a Bloomberg analysis of Chinese customs data published in January — signaling a change in global trade flows amid the changing geopolitical landscape.
Nomura economists wrote in a note on March 15 that the campaign season for the US presidential election this year was likely to heat up some trade issues.
They said: "We reckon China's export price deflation and overcapacity in a number of strategically important sectors might cause trade tensions to escalate later this year, and possibly beyond."
Read the original article on Business Insider
The world is scarred from China shock 1.0. They're not about to let 2.0 happen so easily.
China is pivoting to new economic drivers in the strategic industries of EVs, solar, and lithium batteries. This would impact economies globally.
