Who Says China is in Economic Crisis?

Negative narratives about China's economy are real easy to come by these days. But beyond headlines about defaulting property developers, record youth unemployment, slowing economic growth and a host of other ills, China is actually doing reasonably well – although there is recognition, it can do better!

 

For sure, China will continue to face challenges from the West's restrictive trade policies and I daresay, things can only get worse.

 

Still, China will not be thwarted. A David P Goldman piece published May 21, 2024 in Asia Times, a Hong Kong–based English language news site informs that while China’s exports to developed markets may have stagnated for years, their exports to the Global South have doubled! 

 

Not only have China’s exports to the Global South in total surged by an unprecedented margin, but its exports to every region of the Global South – Asia, Latin America, Africa, Middle East/North Africa and Central Asia – have leapt in lockstep.

 

Some of China’s export success in the developing world, to be sure, reflects a new kind of triangular trade motivated by tariffs on billions worth of Chinese imports that the Donald Trump administration imposed in 2018-2019. China ships components and capital goods to countries like Mexico, Vietnam and India, which then assemble them into finished products for sale in the United States. 

 

Asia Times first documented this grand circumvention of US tariffs in an April 03, 2023 analysis. Since then the World Bank, International Monetary Fund, Bank for International Settlements and the Peterson Institute have published studies documenting the same conclusion: America is more dependent than ever on Chinese supply chains.

 

China’s exports to the Global South have jumped from about $90 billion a month in 2020 to $150 billion a month today, or by $60 billion a month. About half of that, or $30 billion a month, shows up as higher US imports from third countries. Tariff avoidance through the extension of Chinese supply chains to the developing world, that is, explains about half of China’s export growth to the Global South.

 

The other half comes from industries that China has come to dominate during the past several years: electric vehicles, solar panels, digital infrastructure, transportation infrastructure and electronic equipment. 

 

In fact, China has not only worked around the tech sanctions, but it also worked around US tariffs. China has had a plan, expressed at a high level in the Belt and Road Initiative, to replicate some aspects of its industrialization in other countries of the Global South, or what Goldman called “Sino-forming” in his 2020 book, "You Will Be Assimilated".

 

Really, there's no stopping China, besides the fact that the Global South has virtually unlimited demand for $10,000 electric vehicles, affordable solar panels and broadband infrastructure, among many other products that China can offer!