Brazil, a member of the China-led BRICS, has launched a series of probes into the alleged Chinese dumping of industrial products like steel after a surge of cheap imports that have hurt local manufacturers. South Korea’s top steelmakers, POSCO and Hyundai Steel, are also considering filing investigations on the dumping of exported steel plates, including those from China. Indeed, Steel exports from China hit an eight-year high of 15.9 million tons last Jan. and Feb. alone.
The surge of low-cost Chinese goods in critical sectors, like steel, has raised concerns about China exporting deflation. With the real estate market struggling to recover and domestic consumption stagnant, China exports inventories at discounted prices, impacting crucial industries like electric vehicles, batteries, and retail.
While consumers may benefit from the low-cost Chinese products in the short term, the overflow presents challenges for businesses and industries. The firms are compelled to sacrifice profits and cut prices to the extreme to remain competitive against the influx of bargains. The situation is particularly daunting for companies that have accumulated debt during the COVID-19 pandemic, jeopardizing their ability to stay in business.
According to import and export statistics for the first two months of this year by China’s customs authorities, the total value of China’s imports and exports reached RMB 6.61 trillion ( 1210 trillion won ), up 8.7% year-on-year, with exports amounting to RMB 3.75 trillion (686 trillion won), showing a 10.3% rise in the same period. There was an uptick in exports of electrical goods such as integrated circuits and computers, as well as labor-intensive products like apparel, plastic products, and furniture. While China’s Ministry of Commerce official attributed the two-month export performance to “diversifying markets and optimizing structure,” neighboring countries have a different take.
During the first “China Shock” in the late 1990s, the influx of Chinese low-cost goods suppressed inflation in major countries, including the United States, facilitating an unprecedented long-term economic boom. Beneath this prosperity, other countries’ manufacturing hubs inevitably collapsed, weakening industrial competitiveness.
There is a growing concern that the second wave of China shock could potentially trigger a prolonged economic downturn. While the mass imports of low-cost goods may lower consumer prices in the short term, the subsequent collapse of local industries unable to keep up with the low-price competition could set off a vicious cycle of reduced employment and decreased consumption.
