Chinese car giant BYD is starting to dominate the global EV market. Photo: Courtesy of BYD

China’s shock tactics drive US and Europe to act

High-tech rivalry goes beyond war of words as Washington and Brussels call out Beijing’s state subsidies

ByChina Factor Staff

A single spark risks igniting a full-scale trade war with the wildfire consuming major regions of the global economy.

Spearheaded by electric vehicles, battery technology and solar cells, China’s state-funded push into advanced manufacturing threatens to swamp the United States, as well as its European and Asian allies, with cheap exports.

Diplomatic distrust has quickly morphed into anger amid Beijing’s predatory practices.

“Europe faces two main concerns: the war in Ukraine and China-related economic issues, including trade imbalances, market access, asymmetries, and overcapacity,” Sebastian Contin Trillo-Figueroa, a geopolitics analyst at the University of Hong Kong, said.

“China is revealing a reluctance to take action on these matters. If the interconnectedness of these factors remains unaddressed, competitive pressure will intensify further,” he wrote in a commentary for China-US Focus.

Surge or purge?

  • Last week, China’s Customs Administration revealed that exports jumped by 7.6% in May compared to the same period last year.
  • Yet weak domestic demand left anemic imports edging higher at just 1.8%.
  • Overall, China’s trade surplus ballooned to a staggering US$82.6 billion in May.

The strategy is paying off so far this year.

Behind the numbers: “Boosted by exports of high-end, intelligent, and environmentally friendly products, trade growth has further accelerated,” Lyu Daliang, the director of the General Administration of Customs’ Department, told the Xinhua News Agency. 

Dig deeper: Beijing is ramping up exports as Chinese consumer spending continues to dip, fueled by a property meltdown and weakening wage growth. “The strategy is paying off so far this year,” Bloomberg reported.

Between the lines: American President Joe Biden has already imposed 100% tariffs on Chinese electric vehicles or EVs to safeguard the US auto industry. The European Union is expected to go down a similar road this week.

China Factor comment: Massive state subsidies are driving the country’s high-tech industrial landscape. They are forcing down global prices and posing an existential crisis for rival companies in the US and Europe.