Due to economic downturn, weak consumer demand, and shrinking markets, China is facing overcapacity issues, compelling it to rely on export to drive its domestic economy.
More significantly, the Chinese Communist Party (CCP) is attempting to expand a “global price war”, targeting countries such as the US, Japan, Europe, Southeast Asia, Latin America, and others. This strategy involves using low-price tactics to dominate global enterprises and impede efforts by Europe and the US to revitalize industries like electronics manufacturing, clean energy, and electric vehicles – all critical sectors. In essence, it amounts to “subverting the global economic order”.
Ultimately, the increasing surplus of industrial production capacity caused by the CCP poses a significant threat to the United States and the global economy.
During her visit to China from April 4 to 8, US Treasury Secretary Janet Yellen raised concerns about China’s excessive investments in green energy industries such as electric vehicles, solar panels, and lithium batteries, leading to massive overcapacity.
Yellen sternly warned that the CCP’s distortion of global market prices and production patterns, damaging US and global business interests, is unacceptable. She demanded that China must reduce industrial production.
She stated, “I am particularly concerned about China’s long-standing macroeconomic imbalances – weak household consumption, excessive corporate investment, and government support for specific industry sectors exacerbating this imbalance – which pose significant risks to American and other countries’ workers and businesses.”
Yellen pointed out that such issues have happened before. More than a decade ago, massive support from the Chinese government led to China flooding the global market with steel below cost, causing significant damage to the global and American industries.
“China is now too big; other countries cannot absorb such massive production capacity. China’s current actions may change world prices. When the global market is flooded with artificially cheap Chinese products, the survival of American and other foreign companies is at risk,” Yellen added.
However, the CCP disregarded Yellen’s concerns about overcapacity, arguing that amidst a prolonged downturn in the housing market dragging the economy, green industries provide a remedy to revitalize China’s sluggish economy. China rebuked the US for suppressing its rise and prepared to lodge a complaint with the World Trade Organization (WTO).
It is evident that with a regime as rogue as the CCP, dialogue alone cannot solve the issues at hand.
Following the developments post Yellen’s visit to China, it seems that a new round of US-China trade war is impending.
US Trade Representative Katherine Tai, in a hearing on the “2024 Trade Agenda” of the Biden administration before the House Appropriations Committee on April 16, made a strong statement: “We are prepared to use our trade tools in this effort, including taking action through the new 301 clauses and the four-year audit of tariffs under our 301 clauses toward China. The audit aims to evaluate the methods of imposing tariffs to effectively and strategically address ‘forced technology transfer policies’ of China, such as ‘cyber theft’ and ‘cyber hacking’, and the damage caused by relevant imbalances and inequalities in US-China trade relations.”
Tai explicitly accused China’s uncontrolled non-market policies of destroying many US labor communities and industries, including steel, aluminum, solar panels, batteries, electric vehicles, and key minerals.
If Tai’s statement lacks authority, then consider what US President Biden said on April 17 in Pittsburgh addressing the American Steelworker Union.
Biden informed the audience that due to the excess steel produced by Chinese steel enterprises surpassing China’s demand, China ultimately dumps surplus steel into the global market unfairly at low prices. The unfair low prices result from Chinese steel enterprises not worrying about profitability due to high subsidies from the CCP government.
“Know this, way back in the early 21st century, Chinese steel started flooding the market – and entire steel towns in Pennsylvania and Ohio were devastated. From 2000 to 2010, over 14,000 steelworkers and ironworkers lost their jobs in Pennsylvania and Ohio – 14,000 people,” Biden mentioned.
He outright accused the CCP, “They’re not competing; they’re cheating. They’re cheating. And America has paid the price.”
Biden then made it clear, “Note, the US Trade Representative is currently investigating China’s practices in steel and aluminum trade. If this investigation confirms these anti-competitive trade practices, then I will ask her to consider tripling the tariff rates on steel and aluminum imported from China.”
The high probability of a new round of trade war between the US and China is undoubtedly an inevitable consequence of the CCP’s “subversion of the global economic order”.
As some analysts have pointed out, “China’s economy suffered substantial damage during the first phase of the trade war in the Trump era, exacerbated by the erroneous ‘zero-covid-lockdown’ during the pandemic. The implementation of the ‘Anti-Spy Law’ scared away foreign investments and companies, leaving China’s economy akin to a ‘train in derailment’ heading straight for a cliff. However, under the perilous conditions, the CCP chooses to provide weapons to Russia, sustaining Russia’s ‘ability to continue fighting’ on the Ukraine battlefield. Meanwhile, they continue to harass Taiwan with military aircraft and escalate geopolitical tensions in the South China Sea with actions against the Philippines. Today, they seek to subvert the global market through ‘dumping at low prices’. In short, the CCP is gearing up to face two major trade wars from Europe and America!”