{China’s reputation as the “factory of the world” is taking on new and unwelcome implications for embattled Western and Japanese competitors who see their positions being eroded in areas extending from car production to green products.
Recent decisions taken by the National People’s Congress endorsing earlier ones by the Politburo and emphasising the development of “new productive forces” in China can only exacerbate these fears and phobias.
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The West finds itself in a game of whack-a-mole as it seeks to thwart the development of key Chinese industries with tariffs, other economic sanctions and even national security barriers as China switches deftly to new product and export areas.}
{This antipathy has a history of incredulity and indignation on the part of Western powers that China could have made the great leap forward it has since abandoning the excesses of Maoism. China is promising another great leap now.
I must admit that when I was asked to speak at a Shanghai conference on economic development several decades go, I suggested that China should focus on exports of simple consumer goods to mass markets in the developing world. Such patronising attitudes were common even at that time.
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The global market for such products is vast as developing and advanced economies alike strive to meet climate and other green targets. As such, the products are likely to be welcomed by consumers at the relative low prices China can offer.}
{But these attacks seem to stem more from a defensive weakness than self-confidence, and the competitive weaknesses of Anglo-Saxon countries coupled with a possible stock-market-induced financial crisis could tip the balance before long. He who laughs last laughs longest.}
China’s growing dominance in solar panels, electric cars and batteries is putting US and European manufacturers at a disadvantage and is attracting defensive hostility.
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Employees work on solar panels destined for export at a Chinese factory in Lianyungang, in Jiangsu province, on January 4. The West finds itself caught in a game of whack-a-mole as it seeks to thwart the development of key Chinese industries only for China to switch deftly to new areas. Photo: AFP
Opinion
Macroscope by Anthony Rowley
China’s rise as world’s green factory has put West on the back foot
China’s growing dominance in solar panels, electric cars and batteries is putting US and European manufacturers at a disadvantage and is attracting defensive hostility
China’s reputation as the “factory of the world” is taking on new and unwelcome implications for embattled Western and Japanese competitors who see their positions being eroded in areas extending from car production to green products.
Recent decisions taken by the National People’s Congress endorsing earlier ones by the Politburo and emphasising the development of “new productive forces” in China can only exacerbate these fears and phobias.
They imply that China’s economic presence will become even more powerful in Global South countries, where it has made great strides in overturning the dominance of Western nations in everything from infrastructure to pharmaceuticals.
The West finds itself in a game of whack-a-mole as it seeks to thwart the development of key Chinese industries with tariffs, other economic sanctions and even national security barriers as China switches deftly to new product and export areas.
This antipathy has a history of incredulity and indignation on the part of Western powers that China could have made the great leap forward it has since abandoning the excesses of Maoism. China is promising another great leap now.
I must admit that when I was asked to speak at a Shanghai conference on economic development several decades go, I suggested that China should focus on exports of simple consumer goods to mass markets in the developing world. Such patronising attitudes were common even at that time.
02:40
Chinese Premier Li Qiang delivers his first work report amid concerns about state of the economy
Chinese Premier Li Qiang delivers his first work report amid concerns about state of the economy
The sectors being emphasised now by the Chinese leadership include electric vehicles (EVs), batteries and solar panels – dubbed the “new three” areas.
The global market for such products is vast as developing and advanced economies alike strive to meet climate and other green targets. As such, the products are likely to be welcomed by consumers at the relative low prices China can offer.
They also provide China with a way to diversify its economy away from an overdependence on sectors such as property development, as Hung Tran, a non-resident senior fellow at the Atlantic Council, suggested in a recent paper.
Products from these new productive forces account for some 11 per cent of China’s gross domestic product and are capable of a significant expansion, according to Tran, formerly a senior economist at the Institute of International Finance.
01:11
China’s BYD overtakes Tesla as world’s largest EV maker
China’s BYD overtakes Tesla as world’s largest EV maker
The Energy Intelligence Group estimates that the new sectors will account for 18 per cent of China’s GDP by 2027 while the property sector shrinks to a smaller but more sustainable 15 per cent, from a peak of 25 per cent.
The problem for the increasing number of countries, led by the United States, that see China as a competitive, across-the-board threat in manufacturing is that China’s newly endorsed plans imply that it will have a much greater production capacity than needed to satisfy its domestic market.
This is likely to lead to a surge in low-priced Chinese exports to Europe, the US and the rest of the world. For example, China makes most of the world’s solar panel components but consumes barely a third of them, according to Tran. The rest has to be exported.
China’s EV exports have meanwhile increased by 1,500 per cent over the past three years, helping China replace Japan as the world’s largest car exporter, observes Tran.
Alarmed at the prospect of their markets being swamped by Chinese green energy products enjoying state support and their domestic manufacturers being squeezed, the European Union has begun anti-dumping investigations into Chinese EV imports with a possibility of imposing countervailing duties.
The US is, meanwhile, going an almost absurd step beyond and seeking to brand electric cars from China as a threat to national security. It has opened an investigation into data leak risks by Chinese vehicles using “connected” car technology. The White House has spoken of Chinese EVs as “creating new avenues for espionage and sabotage”.
All this is part of what has become an almost life-and-death struggle between the US and China that can only intensify as the US presidential election approaches. It is, however, not so much a struggle for supremacy as a Chinese attempt to ward off a hostile challenge from the US and others.
With much of Europe having taken sides with the US, the Global South is an obvious new battleground for China to focus on, whether it be Asia, Africa, Latin America or the Middle East. And the outcome of the battle is far from clear.
As Tran observes, China’s offer of moderately priced EVs and other products that enable a green revolution is likely to be a strong lure for Global South consumers and governments alike.
We may expect to see Western countries retaliating with claims that such Chinese products are of inferior quality to (more expensive) Western products, in the same way China’s Belt and Road Initiative was undermined.
For now, China is on the back foot as it grapples with problems in its property sector and local government finances, in addition to a barrage of criticism from piqued Western sources that has diverted both foreign business investments and portfolio investment from its shores.
But these attacks seem to stem more from a defensive weakness than self-confidence, and the competitive weaknesses of Anglo-Saxon countries coupled with a possible stock-market-induced financial crisis could tip the balance before long. He who laughs last laughs longest.
Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs
