Global Increase in Rejections of Chinese Products: A Blow to China’s Export-Driven Growth Model
In recent years, there has been a growing trend among nations worldwide to curtail imports of Chinese products. This rejection of Chinese goods comes at a time when Beijing is desperately trying to revive its economy, which has been plagued by a property crisis and a shortfall in domestic demand. However, unlike in the past, when China’s export-driven growth model proved successful, the rest of the world is now hesitant to cooperate.
China’s economy is facing deep-rooted problems, with the property crisis being a major contributor. Ever since the developer Evergrande admitted financial failure in 2021, housing sales and construction activity have plummeted. As of February, housing sales were 33 percent below year-ago levels, while construction activity was down by 30 percent. This crisis has not only burdened individuals and financial institutions with questionable debt but has also depressed real estate values, leading to a decline in consumer spending and hindering local governments’ ability to provide basic services.
In response to these challenges, Beijing’s planners have failed on two fronts. Firstly, they have neglected to address the underlying cause of China’s problems – the property crisis. Despite minor interest rate cuts and limited support for selected projects from state-owned banks, these measures are insufficient to alleviate the burdens inflicted on Chinese finance and the overall economy. Secondly, instead of remedying the crisis, Beijing has doubled down on manufacturing and exports, making China even more dependent on foreign markets for growth.
While an export-driven growth model worked for China in the past, the current circumstances are different. China’s consumer demand has grown, making it less reliant on exports. Additionally, China’s share of global exports has risen to 15 percent, making it harder for other economies to accommodate its needs without harming themselves. As a result, countries around the world are becoming increasingly resistant to Chinese imports.
The United States has already imposed high tariffs on Chinese goods and is now considering additional tariffs on electric vehicles (EVs), batteries, and other green energy products, as well as steel. The European Union has raised concerns about China’s dumping of cheap EVs in its markets and is contemplating retaliatory tariffs. The United Kingdom has also complained about an influx of Chinese tractors and construction machinery, prompting an anti-dumping investigation. Similar complaints have been lodged by Brazil, India, Indonesia, Chile, and Mexico in various sectors such as steel, ceramics, chemicals, and textiles.
Since the beginning of the year, governments worldwide have announced over 70 import-related measures against China, surpassing the numbers from the previous years. This growing resistance to Chinese products signifies that China’s export-driven model is no longer viable. The memories of past successes may temporarily blind Beijing’s planners and policymakers, but reality will eventually force them to refocus on resolving the country’s ongoing property crisis and stimulating domestic demand.
In conclusion, the global increase in rejections of Chinese products poses a significant challenge to China’s export-driven growth model. While Beijing is eager to offload surplus products through increased exports, other nations are increasingly reluctant to accommodate China’s needs. With governments worldwide implementing import-related measures against China, it is clear that the old remedy of relying on exports will not work this time. Beijing would be wise to shift its focus towards addressing the underlying issues within its economy, particularly the property crisis, as stimulating domestic demand remains the key to success in a developed economy – something China has become.
