SHANGHAI — China dominates the world’s sale of solar panels and has overtaken Japan as the world’s biggest auto exporter. It’s even making headway in the global sale of low-tech products like shoes.
Now Beijing is considering using its power as an exporter to try to stabilize an economy suffering from a housing crisis and weak spending by wary consumers after nearly three years of pandemic restrictions. The decision could reverberate throughout the global economy and provoke a backlash among trading partners already under siege from Chinese exports.
«For the world’s second-largest economy to depend on the rest of the world to fuel its growth would not bode well for the global economic outlook,» said Eswar Prasad, an economist at Cornell University in New York.
Senior Chinese government officials have said they plan to invest in upgrading industries and promoting greater domestic trade., not just flood foreign markets with manufactured products like electric vehicles. But economists say the experience of countries with consumer spending problems suggests that a wave of Chinese exports is likely.
Relying on exports to fuel growth is a tried and true formula for China. And Beijing has allowed the Chinese currency, the renminbi, to fall about 7 percent against the dollar since mid-January, making the relative cost of Chinese products cheaper for buyers from other countries.
“The normal way for a country to get out of a real estate doldrums is to do it via exports,” said Brad Setser, a former international economic policymaker in the Obama and Biden administrations who now sits on the Council on Foreign Relations.
A glut of vacant and unfinished housing has led to a sharp drop in construction, once China’s biggest industry. Developers are drowning in debt. An erosion in house prices, the main asset of Chinese households, has made hundreds of millions of households more cautious about spending money.
And local governments, which have spent heavily during the pandemic, have gotten so deep in debt that they are struggling to provide health care for residents and pay the salaries and pensions of bureaucrats.
In Europe, a key market for a wide variety of Chinese goods, officials and business leaders have said they are wary of China’s growing trade surplus because they are already struggling to deal with an influx of Chinese cars. And China’s close association with Russia has caused alarm in Europe about the mainland’s dependence on China.
In stead of, China is stepping up exports to Southeast Asia, which further processes these products and ships them to Europe and the West.said Deborah Elms of the Asian Trade Center, a consulting firm in Singapore.
But there is a practical challenge: China’s trade surplus in manufactured goods is so large — equivalent to a tenth of the entire Chinese economy, Setser’s calculations found — that it may be difficult to expand it further.
According to the United Nations Industrial Development Organization, China accounts for almost a third of global manufacturing output. Further growth may be particularly difficult now because some of China’s biggest export markets are showing signs of weakness after interest rate hikes to combat inflation.
But the recent fall in the Chinese currency could trigger a rebound in exports. Experts said there is one area where China has room to expand its exports: new technologies. China has quadrupled its auto exports in just two years, to more than $6 billion a month, via its strength in electric vehicles. The value of its car exports surpassed smartphone exports for the first time in May.
Green energy is another area in which China is thriving. Its exports of solar panels have tripled in the last three years, to nearly $5 million a month.
Experts at the World Bank and elsewhere have said that China should try to prop up its national economy by strengthening health insurance, pensions and other aspects of the social safety net, so that Chinese households feel more confident in spending money. However, such a change would take time.
keith bradsher
The New York Times
BBC-NEWS-SRC: IMPORT DATE: 2023-07-10 21:10:07