China is threatening to flood developed nations with cheap high-tech exports as consumer spending at home stalls amid a tanking domestic economy.
Beijing has turned its back on funding the crumbling property sector after giant developers Evergrande and Country Garden became buried in mountains of debt, shattering consumer confidence and spending.
Instead, state investment is being ramped up in heavily subsidized advanced manufacturing, which jumped by more than 38% by the end of September, the People’s Bank of China revealed.
The move has sparked an outcry from the European Union after Brussels launched an investigation into subsidies for Chinese electric vehicles and other technologically advanced exports.
“There is lower consumption in China right now but you have massive overcapacity that is being pushed out to the world, including in batteries, solar, and chemicals,” Jens Eskelund, the president of the European Chamber of Commerce in Beijing, said.
“Europe and China are like two trains that are going to collide,” he told the Reuters news agency in a report today, referring to a bubbling trade dispute.
- The EU has moved before against China under anti-dumping regulations.
- In 2013, Brussels launched “definitive anti-dumping and anti-subsidy measures on imports of solar panels from China.”
- But that has not stopped Europe from being awash with “cheap Chinese imports.”
Delve deeper: “Europe’s solar power industry has warned that a glut of cheap Chinese imports has pushed some manufacturers to the brink of bankruptcy, hampering efforts to boost local production of green technologies,” the Financial Times stated in September.
Between the lines: President Xi Jinping has made a priority of turning China into an “advanced manufacturing powerhouse.” Sectors such as EVs, wind turbines, solar, and high-end semiconductors are powered by state subsidies.
Big picture: China’s predatory trading tactics will be on the agenda when President Joe Biden holds talks with Comrade Xi at the APEC Summit in San Francisco this week.
China Factor comment: Beijing’s mercantile policy is at the heart of a trade war with major democracies that has dragged on since before the outbreak of the Covid-19 pandemic in 2020.