Imports of manufactured goods into China have grown by an average of just $15 billion annually over the last six years, essentially unchanged after accounting for inflation. But exports from China have shot up by more than $150 billion.
“When it comes to manufactured goods, trade with China is virtually a one-way street,” Setser said.
That massive disparity is hurting other economies, especially other export-oriented ones like Germany and Japan, he added.
The problem can be traced back to China’s refusal to rebalance its economy after the global financial crash away from its heavy dependence on investment and trade. Rather than shift the economy toward the consumer sector, Beijing fueled a real estate and infrastructure bonanza. But fearing a bubble, Xi clamped down on the boom, setting off a slump that China still hasn’t recovered from.
At the same time, Xi avoided directing massive stimulus to consumers during the pandemic, unlike many other countries that fueled demand for Chinese products. Instead of consumers, China offered support to its manufacturers, resulting in overproduction that only overseas demand couldn’t match.
Now, China alone has the capacity to produce two-thirds of the world’s demand for cars, Setser said. Similarly, China makes more than half the world’s supply of steel, aluminum, and ships. China’s volume of exports is expanding three times faster than global trade, meaning its gains are coming at the expense of others.
“This points to a world economy in which China has no need for the industrial inputs of other countries while leaving those countries dependent on Chinese-made goods—and vulnerable to Beijing’s political and economic pressure,” he predicted.
The West needs to deregulate, hard and fast.