“The art of war is to subdue the enemy without a fight.” This precept of Sun Tzu, from The Art of Warseems to have been followed to the letter by Beijing in its trade policy. From solar panels to consumer goods, cheap Chinese products have overwhelmed the world, jeopardizing the competitiveness of manufacturers in Europe and elsewhere. Nothing seems to stop this surge: China this week posted exports up 7% in yuan in 2024, propelling its trade surplus to a new record.
We know that its manufacturing sector is still powerful, but domestic demand is no longer keeping up. So much so that the country finds itself in overcapacity in a wide range of products. Faced with Washington’s threat to impose customs tariffs of 60%, the world’s second largest economy will have to find other markets to dump its surplus. And she has no shortage of options. “The implementation of new American customs duties will only accelerate the development of China’s trade with the countries of the Global South – Africa, Southeast Asia and the BRICS +,” explains Olivier Scalabre, general manager of BCG France. In a recent report, the consultancy predicted that, even in the absence of a new tariff policy, China’s trade with countries in the Global South would increase by $1.25 trillion by 2033, a pace average annual growth of 5.9%.
European fragility
And Europe in all this? On the Old Continent, whose economy is already slowing down, concern is growing. “This Chinese flow risks accentuating European deindustrialization, especially since American pressure will encourage Chinese companies to lower their export prices even further to sell their goods,” anticipates Camille Boullenois, deputy director of the organization. Research Rhodium Group. If the European Union has raised its tone against China, particularly on the issue of electric vehicles, its fragility persists. “The problem is that the European levers to ensure its commercial defense are limited. The Commission can launch anti-subsidy investigations, but these procedures are long and must be carried out product by product, which limits their reactivity and their scope,” continues the researcher.
At the same time, Chinese companies could be encouraged to invest directly in target countries in order to circumvent possible protectionist measures, underline Coface experts. in a report. In Europe, this is already the case: Hungary has welcomed with open arms the construction of a factory by battery giant CATL, while wind turbine manufacturer Mingyang plans to set up in Italy. Olivier Scalabre is not worried about this, even judging that the Europeans could benefit from this presence: “a few years ago, the Chinese asked for help from Europe to build their industrial fabric. In our turn, we “We could seek their support to develop sectors where they have a significant lead, such as batteries or microelectronics for example.”
Relaunch domestic demand
In the meantime, there is no guarantee that Beijing will manage to sell all its stocks. Because the United States is not the only one to be irritated by the spillover of “made in China” and to consider barriers to stem this steamroller. Indonesia, for example, has discussed possible customs duties of 200% on certain products. “In the longer term, if Chinese companies struggle to diversify their outlets, customs barriers could lead to bankruptcies in the industrial sector,” imagines the BCG France expert.
Another solution to absorb this surplus would be to stimulate domestic consumption. Except that consumer confidence is not there. “For the moment, the measures announced by the government are insufficient to revive this demand in the long term,” believes Camille Boullenois.
In Beijing, we turn a blind eye to the problem. In a press release dated last April, the Chinese embassy in France allowed itself a few barbs. “The theory of Chinese overcapacity basically reveals the decline in competitiveness of Western industries.” And took the opportunity to give advice: “the West will have to redouble its efforts to catch up, rather than complaining about China’s ‘too efficient’ economic system.” To meditate.
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