An NYT op-ed looks at the other huge threat to global trade…
China now dominates global manufacturing, and its trade surplus dwarfs the biggest run by Germany and Japan during their eras of postwar export supremacy. Countries around the world get cheap Chinese products, but they can’t sell nearly as many of their own to China. Their export sectors are hurting — see Germany — and not hiring.
Why is Mr. Xi doing this? To make up for the Chinese government’s mismanagement of its domestic economy.
The author recounts China’s longstanding over-investment and under-consumption, and its recent property bust…
Mr. Xi’s response to the Covid pandemic also played a role. To cushion the pandemic’s economic shock, advanced economies around the world opened up their government checkbooks to support consumer spending. The one major economy that didn’t take significant steps to stimulate its economy and support households was the country where the virus first took hold: China. He is ideologically opposed to cutting government checks or anything else that smacks of welfarism, believing that consumer stimulus — unlike investment — generates no lasting value. So while consumers in the United States and elsewhere began spending again, including on Chinese imports, China was able to recover on the back of other countries’ stimulus checks while throwing everything into building out its manufacturing sector to replace the growth that property wasn’t providing.
In other words, Mr. Xi is making China’s trade partners and competitors pay for the government’s misplaced bet on real estate and its longer-term failure to strengthen the spending of Chinese households.
…Mr. Xi has a one-way vision of trade. Mr. Trump often sounds as if he doesn’t believe in any trade. Between the two of them, the global economy is in for a rough ride.
The four stats to remember (give or take a percentage point): China has 20% of the world’s population, and accounts for 20% of the global economy; and it produces 37% of global manufactures, and accounts for just 13% of global consumption.
I’m not sure why the NYT headline says that ‘the world’ is paying for Xi’s mistakes. The world has been more than willing to accept cheap Chinese goods, which have dramatically boosted living standards for most people—though perhaps not for Germans lately. It seems to me that it is the Chinese people who are bearing the cost of Xi’s errors. Their savings and improvement in standards of living are being sacrificed to fund the world’s green transition and to propel China’s race to surpass America in military prowess.