Forecasts about the level of Chinese exports for October were confirmed for the worse for Beijing. Specifically, this year’s export volume for the month was 6.4 per cent lower than last year, at a time when the Chinese economy looks set to end 2023 with a negative export record. For the past six months, Chinese exports have been on a dramatically declining trend, at a time when China has now increased its imports from third countries by 3 per cent.
According to the IMF, global growth will continue to slow for some time – a consequence of the policy of the world’s major central banks to keep their interest rates high in an attempt to dampen global inflation crisis. This automatically implies a decline in global demand for Chinese goods, which weakens one of Beijing’s greatest economic advantages in global competition.
The systemic crisis in Chinese real estate, as well as the country’s historically high unemployment rate, have contributed to the economic crisis experienced by the Chinese economy, which nevertheless remains on a growth path. In any case, the reduced demand for Chinese products has important domestic implications.
On the one hand, Chinese exporters have reduced the prices of their goods by around 20% in order to survive this reduced demand, while on the other, the Chinese currency has experienced a record depreciation against the dollar. Worse still for Beijing, its competitive advantage in the electrification sector is largely threatened by the measures already taken – and expected to be tightened further – by both Brussels and Washington, which are keen to weaken Chinese influence in one of the most critical sectors of their respective domestic markets.
Currently, the EU is considering imposing strict tariffs on Chinese ‘green’ products such as solar panels in order to protect European producers, while the US government has imposed very high tariffs on Chinese steel imports in order to protect its domestic industry as well – but also to further weaken China’s export footprint in a critical industrial sector.
At this point in time, Chinese exports are not expected to recover immediately, while the constantly deteriorating diplomatic relations between Beijing and Washington will continue to affect global trade balances. In the first instance, however, the Chinese government is not considering reducing its industrial output, hoping that forecasts calling for an increase in Chinese exports in the first few months of 2024 will be confirmed. Instead, Beijing is focusing on tackling the country’s housing crisis and increasing Chinese consumption so that the Chinese economy can remain competitive and return to faster growth rates.
