Chinese-style dumping

29. April 2024
-IAM, News

Hugues Chevalier, Economist

In the1st quarter of this year, economic growth in China accelerated to 5.3% year-on-year, exceeding forecasts. This growth is due to the rebound in exports. Domestic demand remains weighed down by the continuing decline in the residential property sector and sluggish household consumption. In short, the only sector to have grown in recent months is the export sector. The sluggishness of domestic demand is confirmed by the trend in consumer prices, which remains close to 0%, underlining an economy in overcapacity. This production overcapacity, in line with the rebound in investment in the industrial sector, all financially supported by the authorities, is therefore being exported. The world is currently flooded with Chinese manufactured goods sold at dumping prices. The United States made no mistake and (re)introduced import barriers for these products. As a result, Chinese exports to North America are not growing. On the other hand, Europe, which has not put any import barriers in place, is seeing its markets flooded by Chinese electric vehicles, lithium batteries and “solar” products, all subsidised in one way or another by the Chinese government. The sharp upturn in Chinese exports to Europe confirms this trend. The European economy is already struggling, with domestic demand seriously affected by inflation and rising interest rates. Although the European Commission has opened an investigation into Chinese subsidies for electric vehicles, this has not yet prevented the import of manufactured goods at dumping prices. Several European solar companies have already gone bankrupt because they can’t keep up in terms of price. But the German government, anxious to maintain its export market to China, is putting the brakes on any measures to deal with these imports. The process of reindustrialising Europe will remain a pipe dream as long as European companies face unfair competition. Meanwhile, the Chinese authorities are defending themselves by claiming that “exports of electric vehicles, lithium batteries and solar products have improved global supply and eased inflationary pressure” ….