China’s export-driven economic strategy is drawing increasing resistance from countries it once sought to court. As reported by The Wall Street Journal (WSJ), the flood of low-cost goods spilling into developing markets is not only disrupting local economies but also threatening Beijing’s ambitions to lead the Global South. This growing tension underscores how China’s reliance on cheap exports is creating fractures in its global alliances and inviting retaliation.
A Deluge of Chinese Products
Following a slump in its real estate market and weak domestic demand, China has ramped up its exports, directing a surge of inexpensive goods toward emerging markets. According to the International Monetary Fund (IMF), Chinese exports to these regions rose by 19% from 2022 to 2024, while imports from those same regions increased only 11%. This imbalance swelled China’s trade surplus with developing economies to $384 billion in the 12 months leading up to August 2024—56% larger than in 2021.
Emerging markets, such as Indonesia, Brazil, and South Africa, are grappling with this influx. Steel, textiles, ceramics, and electronics are among the key sectors overwhelmed by Chinese imports. For example, Indonesia’s toy industry saw Chinese imports double in value between 2018 and 2023, forcing local producers like Pt. GMS to downsize and shift toward cheaper products requiring less labor. “It’s like they’re burning money to make the sales cheap,” said Winata Riangsaputra, the company’s director.
Economic Disruption and Factory Closures
The impact on local industries is stark. In Thailand, over 1,700 factories closed from early 2023 through the first quarter of 2024. Meanwhile, Brazil’s industrial sector, once contributing 36% of its GDP in 1985, now accounts for less than 11%. Brazilian steel producers struggle to compete with imports that are often cheaper than domestically produced alternatives. Jefferson de Paula, head of ArcelorMittal in Brazil, lamented, “What’s the point of investing in a country where some 20% to 23% of steel is already imported? It’s a horrible market for us.”
For many developing nations, this economic strain has revived fears of a new “China Shock,” similar to the disruption experienced by U.S. industries two decades ago. Between 1999 and 2011, over two million American manufacturing jobs were lost as furniture, clothing, and toy industries collapsed under pressure from Chinese competition.
Retaliation and Protectionism
In response, developing countries are adopting defensive trade measures. According to Global Trade Alert, nations have enacted nearly 250 interventions targeting Chinese imports since 2022. Brazil accounts for over 120 of these actions, imposing tariffs on goods such as steel, auto parts, and telecommunications equipment. In October 2024, Indonesia banned the Chinese-origin e-commerce app Temu, arguing that its predatory pricing model jeopardized local small businesses. “If foreign products enter with prices far lower than products from our own small businesses, consumers will choose the cheaper offerings,” explained Prabunindya Revta Revolusi, an official with Indonesia’s Communications Ministry.
Other nations are similarly drawing lines. Chile imposed anti-dumping tariffs of up to 15% on Chinese steel, while India has launched investigations into a wide range of Chinese goods, including industrial lasers, textiles, and circuit boards. These measures aim to protect local manufacturers and prevent further factory closures.
However, there is a risk of escalation. China, which has been critical of rising protectionism, has warned it would “take necessary measures to safeguard the legitimate rights and interests of Chinese companies,” according to its Foreign Ministry.
China’s Dilemma
China’s reliance on exporting its surplus goods stems from deeper economic challenges at home. Its real estate collapse and sluggish consumption have forced the government to support its manufacturing sector with subsidies and loans. As a result, Chinese factories continue to produce goods at a pace that far exceeds domestic demand.
The WSJ reports that China’s export prices for major products—ranging from steel to consumer electronics—have declined significantly, making them highly attractive to overseas buyers but devastating for local producers in importing nations. Steel prices, for example, have dropped nearly 30% in value, contributing to a 22% increase in Chinese steel exports in 2023.
Beijing’s trade strategy has also complicated its relationships with key allies. In Brazil, despite close ties between President Luiz Inácio Lula da Silva and Chinese leader Xi Jinping, the influx of Chinese goods has strained economic relations. Lula’s administration recently doubled import tariffs on certain steel products and called for tougher restrictions to protect local industries.
Similarly, South African President Cyril Ramaphosa voiced concerns during a Beijing visit, as Chinese exports to South Africa have doubled since 2016, even while South Africa’s economy stagnates.
The Global South’s Crossroads
Developing nations once saw China as a vital partner in their rise up the economic ladder. Many believed China’s transition to higher-end manufacturing would leave room for emerging economies to develop their own industrial bases. Instead, China has retained its grip on low- and mid-end manufacturing, dashing these hopes.
“There is a lack of opportunity for emerging economies to export those low- to mid-end products, in which they could actually be competitive,” said Camille Boullenois of the Rhodium Group.
For now, China continues to rely on its export machine to drive growth, even as its relationships with allies grow more complex. Xi Jinping’s pledges to support the Global South through initiatives like the Belt and Road program are increasingly at odds with the reality of China’s trade practices. As emerging economies turn to protectionism, Beijing must weigh whether to recalibrate its economic strategy or risk further isolation.
A Fragile Future
The global pushback against China’s cheap exports signals a potential turning point in international trade. Developing nations face the challenge of shielding their industries while maintaining ties with Beijing, whose investment and infrastructure projects remain critical to many economies.
At the same time, China must confront the limitations of its export-reliant growth model in an increasingly protectionist world. As The Wall Street Journal noted, “The world’s capacity to absorb a new China shock is less than it was in the past.”
ACZ Editor: One cannot ignore the Chinese strategy that attempts to take over manufacturing in developing nations, the concerted effort for economic domination. Even allies of China understand that the flood of cheap goods must be paid for with whatever they have – natural resources, land, and the hosting of Chinese people – and of course the eventual economic subservience.