The Wall Street Journal comments China Is Starting a New Trade War.
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China is cranking up its massive export machine again, and this time there’s nowhere for competitors to hide
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%.
The European Union’s recent decision to impose tariffs on imported Chinese electric vehicles is only the latest sign of deepening tensions. The U.S. earlier this year hiked levies on Chinese steel, aluminum, EVs, solar cells and other products. Turkey has jacked up duties on Chinese EVs, while Pakistan raised tariffs on Chinese stationery and rubber.
Chinese leader Xi Jinping ordered officials to double down on the country’s state-led manufacturing model, with billions of dollars in fresh subsidies and credit.
China has added capacity to produce some 40 million vehicles a year, even though it sells only around 22 million at home. It’s on track to make around 750 gigawatts of solar cells this year, despite only needing 220 gigawatts domestically in 2023. And it is expected to account for 80% of the world’s new supply this year in basic chemicals such as ethylene and propylene, used to make garbage bags, toys and cosmetics—even though prices in China have been falling for 19 months, a sign of oversupply.
Two principles have guided Xi’s thinking, Chinese policy advisers say. The first is that China must build an all-encompassing industrial supply chain that can keep the domestic economy running in the event of severe sanctions by the U.S. and other Western countries. In the top leader’s views, advisers say, industrial security sits at the core of China’s stability as tensions with the developed world rise.
The second is a deep-rooted philosophical objection to U.S.-style consumption, which Xi sees as wasteful.
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China’s first fear is well founded in reality. US sanctions on chips and AI technology have forced China to go it alone.
It’s a US mistake to think it can cut off China from leading technology.
Should the US succeed, China would and could cut the supply or rare earth minerals the US needs to make phones, missile guidance systems, EVs, wind turbines, and advanced chips.
China is on track to make around 750 gigawatts of solar cells this year, despite only needing 220 gigawatts domestically in 2023.
But the US grows more corn and soybeans than it can eat.
If every country produced only what it could consume, global trade would be zero.
Gonna be interesting.
Demographics means the end of China’s manufacturing capacity. How long before that occurs? And how damaging will China over production before then?