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As the economic confrontation between China and the US intensifies, Chinese companies are forced to reduce production and send employees on forced leave, the Financial Times reports.
What happened?
The US administration has recently increased tariffs on a number of Chinese goods, which has led to a significant drop in demand for Chinese products. In particular, the increase in customs duties affected electronics, industrial equipment, automotive parts and textiles.
Export-oriented factories in Guangdong, Zhejiang and Fujian provinces, where the country’s main industrial hubs are located, were hit hardest.
What are the implications for the Chinese economy?
- Decline in exports: In the first months of 2024, the volume of Chinese goods shipped to the United States decreased by 18% compared to the same period last year.
- Job cuts: Dozens of companies have already shut down some production lines, and workers are going on unpaid leave.
- Falling investor confidence: Chinese stock exchanges reacted to the situation by lowering their indices, which could trigger an outflow of foreign capital.
Global influence: what does it mean for the world?
The problems of Chinese manufacturers could cause disruptions in global supply chains. This applies to the automotive, electronics and textile industries, where China remains the main supplier of components and raw materials.
Financial Times analysts predict that a shortage of Chinese goods could lead to higher prices in the US and Europe, especially in the electronics and automotive sectors.
How is China reacting?
Beijing has so far refrained from symmetrical actions, but is already considering retaliatory duties on US goods.
Ministry of Commerce of the People’s Republic of China:
“We call on the US to abandon its policy of economic pressure. China is ready to negotiate, but it will not give up its interests.”
Currently, the Chinese authorities are focusing on supporting the domestic market and stimulating sales of goods in Asia, Africa and Latin America.
The world is on the verge of a new round of economic confrontation
The decline in production in China is another signal that the trade war between the world’s two largest economies is escalating. Analysts do not rule out that the conflict could escalate into a full-blown trade crisis that would hit global markets.
