China’s Export Strategy Causes Global Market Havoc: Report

China’s ‘Made in China’ products have already established a firm foothold in the international market, surpassing the expansion of any other nation in history. Manufacturers all over the world are under tremendous pressure due to the flood of cheaper Chinese goods. China is now focussing more on exporting in an effort to take the lead in the world’s manufacturing sector.

According to a report in The Wall Street Journal, Chinese President Xi Jinping has increased his focus on the manufacturing sector, with a high percentage of production going to export, in response to the slow economic development that his government is facing in recent past. China is once again ramping up its massive export machinery, giving rivals little opportunity to survive in the market.

The impact of China’s manufacturing dominance is evident in various sectors. For instance, a Massachusetts startup called CubicPV betting on silicon wafers, a high-tech component in solar panels. Buoyed by President Biden’s climate legislation enacted two years ago, with billions of dollars in tax credits and government loans, CubicPV announced plans in late 2022 for a $1.4 billion wafer plant in Texas.

Since then, China has nearly doubled its output of silicon wafers-way more than it needs. The extra wafers had to go somewhere, and they went overseas, pushing prices down by 70%. CubicPV had to halt its production plan early this year, putting engineers and other employees out of work, citing “a distorted market as a result of China’s overcapacity.”

In another case, thousands of miles away, in Chile, iron ore miner and steelmaker CAP is struggling with China’s continued commitment to low-end commodity manufacturing as an onslaught of cheap Chinese metal hits its shores. The firm said this month that it would shutter its giant Huachipato steel mill in central Chile indefinitely, with the loss of some 2,200 jobs. The company said it can’t compete with low-priced Chinese metal even after the government raised tariffs on steel bars and other imported products.

Beijing’s strategy of bolstering its manufacturing sector through aggressive exports is creating significant challenges for businesses around the world. This escalating trade tension raises concerns about the potential for a new global trade war.

The WSJ report further mentioned that other countries have opened antidumping investigations to see whether Chinese goods are being sold below fair value. India is examining Chinese pigments and chemicals. Japan is looking at electrodes. The UK is investigating imports of excavators and biodiesel, while Argentina and Vietnam are probing Chinese microwave ovens and wind towers.

Xi Jinping’s “establish the new before breaking the old” strategy prioritizes building new industries like EVs and semiconductors while maintaining traditional ones like steel. Despite acknowledging overcapacity, China continues to invest heavily in manufacturing, driven by concerns about industrial security and economic stability. This approach is straining global trade relations and causing economic hardship in other countries.