Dominance of Chinese exports: what you need to know

Chinese car shipments to overseas markets have increased fivefold over the past four years. Its solar panels dominate global markets. Even exports in labor-intensive sectors like furniture manufacturing, which China was expected to lose to lower-wage countries, are on the rise.

American and European leaders are increasingly making it clear that a flood of Chinese exports is flooding their markets. Developing countries like India and Brazil are joining in to start limiting purchases from China. Rich and poor countries alike fear that many of their factories will be forced to close, unable to compete with China's newer, more automated factories.

But China's manufacturing sector is so strong that it will be difficult to counter the export surge. China is already installing more factory robots than the rest of the world combined. China's low-cost supply chains produce almost every part imaginable. And Xi Jinping, the country's top leader, is pushing the country's banks to lend more money to build even more factories.

At the same time, Chinese companies are finding ways around Western trade barriers. They divide shipments into small packages that are low enough in value to be exempt from customs duties. Chinese companies have increased exports to the West via indirect routes to Southeast Asia and Mexico, avoiding tariffs on goods coming directly from China.

What are China's main exports?

No category of Chinese exports has attracted as much attention as cars. In just four years, China has gone from being a success story to becoming the world's largest car exporter, with nearly five million cars exported last year.

Chinese exports of electric cars have received the most attention, but three-quarters of exported cars are equipped with gasoline engines. As electric cars have gobbled up market share in China, automakers have shipped their surplus gasoline cars to markets like Russia, where Chinese cars have captured more than half the market, and Mexico.

China has begun building its own fleet of 170 transoceanic car ships to transport several thousand cars at a time to distant markets. Before the Covid-19 pandemic, global shipyards delivered only four of these ships each year.

The ships themselves have also become a major Chinese export, more than doubling in the first three months of this year compared to the same period last year. United States began an investigation Wednesday into whether China used unfair trade practices to expand its shipbuilding industry.

Solar panels and their key component, solar wafers, are among China's fastest growing exports in terms of quantity. Wafer exports almost doubled last year. But as the prices of solar products fell by almost half, the total value of China's solar exports fell slightly last year.

The European Union has opened an investigation which could lead to limiting Chinese solar exports. The United States is also considering stricter rules on solar energy imports.

Why is China pushing its exports so hard?

China is trying to get out of the housing crisis by exporting. The construction of apartment buildings was once the engine of China's economy. But a decades-long housing bubble burst and apartment prices fell, leading to a sharp slowdown in construction. Dozens of real estate developers are running out of money.

Beijing hopes that strong sales of manufactured goods abroad, as well as massive investments in factories making those goods, will help offset the country's real estate debacle. The first signs show that Beijing's gamble is paying off.

The economy grew 6.6% annually in the first three months of this year, faster than expected. Manufacturing investment and exports led the way.

How much is Beijing helping its manufacturers?

China's state-run banks are investing money in manufacturing companies. Low-interest loans allow companies to afford to build factories with lots of robots and invest heavily in research and development.

The net increase each year in lending to industry has been enormous. It stood at $83 billion in 2019. Last year, the annual increase in industrial loans skyrocketed to $670 billion.

China's major cities are also vying to help local manufacturers. Shenzhen helps electric car producers, such as BYD, obtain export insurance, purchase ships and set up overseas research and development centers. Tianjin, a vast port near Beijing, is modernizing its docks and streamlining customs procedures.

The export boom comes as China already produces nearly a third of the world's manufactured goods, more than the United States, Japan, Germany, South Korea and Britain combined, according to the Organization of the United Nations for Industrial Development.

Can China overcome trade barriers?

European leaders in Brussels recently took preliminary steps toward trade restrictions on Chinese goods. Besides solar products, they focus on electric cars, wind turbines and medical devices.

The Biden administration is following up on the Trump administration's trade actions. On Wednesday, President Biden called for sharp increases in tariffs on steel and aluminum from China.

But Beijing and Chinese companies have had years to learn lessons from President Trump's imposition of tariffs on nearly half of China's exports to the United States. The precautions taken by China could make it very difficult to stop its exports.

China has concluded 21 free trade agreements with 29 countries and territories in recent years. Many of them, like Vietnam and Thailand, are countries that the West is also courting as it tries to encourage a shift of global manufacturing away from China.

Because of its trade agreements, China has sold to these countries many more components of all kinds that go into the composition of products intended for the West. Chinese exports to Southeast Asia have jumped 75% over the past four years, according to China's General Administration of Customs.

Chinese companies like Shein have also become adept at sending packages directly to homes in the United States, avoiding tariffs. The United States allows residents to import up to $800 worth of goods per day without paying customs duties, or nearly $300,000 per year.

Senator Bill Cassidy, Republican of Louisiana, has launched a legislative campaign to bring the United States into line with China's limit on duty-free imports of $6.50.

Read you contributed to the research.