Why is China producing so many export goods, anyway?18 May 2024 22:57
Well written article
https://www.noahpinion.blog/p/why-is-china-producing-so-many-export?
AI summary
Economic Stimulus:
- China's exports are booming despite a slowing economy, largely due to a real estate bust.
- Government stimulus is driving industrial expansion as a replacement for the real estate boom, aimed at keeping young Chinese employed.
Overcapacity/Underconsumption:
- China's overcapacity resulting from slowed consumption post-real estate bust leads to dumping excess products on the world market.
- Government subsidies and difficulty adjusting production plans also contribute to overcapacity.
Comparative Advantage:
- China's leaders contest overcapacity claims, arguing that exports reflect the country's natural place as the world's manufacturer.
- However, a trade surplus requires more than the theory of comparative advantage.
Trade Restrictions:
- Tariffs imposed by other countries are in response to China's rising trade surplus in manufactured goods.
- The Second China Shock has prompted a global shift in trade barriers and industrial policies.
China's Manufacturing Strength:
- China's vast internal market allows Chinese manufacturers to reach enormous scale, driving their costs down relative to companies in other countries, even before they export anything.
- It allows China to have a vast network of suppliers for every type of manufacturing, without having to order many parts and materials abroad.
Forced Deindustrialization:
- China might be intentionally trying to wreck the manufacturing industries of its geopolitical rivals, in order to gain a military advantage over them.
- Gaining a commanding share of global manufacturing might allow China to displace the U.S. and its allies as the world’s dominant power without a fight.
Xi Jinping’s Techno-Historical Theories:
- China aims to monopolize high-tech industries of the future as part of a techno-scientific revolution.
- The export boom could be downstream of the decision to subsidize key technologies for China's future power.
War Preparation:
- China's subsidy-driven manufacturing boom could be preparing for war production by building up civilian industries that are easily converted to military use.
- A big focus of Chinese industrial policy has been to onshore entire supply chains to insulate the country against sanctions and blockades.
Xi's Strategic Shift:
- Xi has focused on insulating the Chinese economy from external vulnerabilities by emphasizing self-reliance over growth.
- Strategic measures are in place to safeguard against potential economic pressures.
Multiple Theories at Play:
- Various theories, including war production objectives, industrial policy alignment, and economic forces, may all coexist.
- The export boom could be a result of China's military production capabilities.
Potential Implications:
- Theories could align towards war production, recession-fighting, and deindustrialization motives.
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