The Risk of a “Chinese Shock”: A Growing Concern in the West

The West is concerned about the growing presence of competitive and high-quality Chinese products in various sectors, not just automobiles. The Wall Street Journal anticipates a new “Chinese shock”, similar to that of the 1990s and early 2000s, when huge quantities of low-cost goods from China flooded global markets.

Currently, China aims to support economic growth through manufacturing exports, producing more cars, machinery, and electronic devices than its domestic market demands. Chinese companies, supported by subsidized financing and state aid, are preparing to launch their products in international markets to achieve the 5% growth target by 2024.

What sets this situation apart is the sophistication and competitiveness of Chinese products, which now directly compete with those from Western countries such as Germany. As a result, the West is now investing more in its own industries to reduce dependence on China and protect its market by imposing tariffs on Chinese imports.

However, China still grapples with the issue of industrial overcapacity and seeks to offset the decline in the real estate sector with exports. This could lead to trade and political tensions as markets may be flooded with Chinese goods without sufficient demand.

The United States, the European Union, and other countries are trying to protect their industries and trade relations, but the absence of a global agreement through institutions like the World Trade Organization creates uncertainty and growing tensions.
China may try to shift its focus to emerging and developing countries as alternatives to Western markets. However, this strategy may be challenging as many of these countries cannot absorb the Chinese surplus without incurring unsustainable trade deficits. Consequently, another possible scenario is that China is forced to address internal industrial overcapacity issues while continuing to focus on manufacturing and abandoning unproductive investments in real estate and infrastructure, hoping for support from the rest of the world.

Stay up-to-date with our latest news – > REGISTER HERE