We have all seen the news about China’s declining exports to the US and the EU, leading to speculation that China’s economy is on the verge of collapse. However, a recent statement from the State Council reveals that China’s foreign trade in goods increased by 8.7% in January and February. Exports from China grew by 10.3%, and imports increased by 6.7% compared to last year, which was already a strong year due to the lifting of COVID-19 restrictions.
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The World Bank analysis of these figures suggests that countries replacing China in exports must embrace China’s supply chains. Large developing countries with revealed comparative advantages in a product are replacing China, and these countries are deeply integrated into China’s supply chains and experiencing faster import growth from China, particularly in strategic industries.
For most of China’s modern economic growth history, developed nations such as the USA, the European Union, and Japan were the largest markets in China. However, the downturns in these economies are affecting their ability to afford China’s exports. Although showing slight economic growth, the US has two problems: an increasing number of people falling out of the middle class into low-income and poverty, and restrictions it has imposed on itself to prevent direct imports from China, creating uncertainty in the market’s stability.
Mexico’s trade figures with China and the US illustrate this point clearly. According to Asia Times, China’s increase in exports to Mexico almost perfectly aligns with Mexico’s increase in exports to the US.
China’s largest trading partners are now all members of either ASEAN or BRICS. ASEAN consists mainly of developing and Southeast Asian countries, while BRICS consists of emerging economies.
China’s trade with the places we know as the Third World or the Under-developed World has surpassed that of its trade with the Developed World, and this is not just good news; it is an epoch-changing moment in history: countries that have for centuries been mired in poverty, exploited by Western powers, colonised, and, in some cases, even had their populations enslaved are now rising up the economic food chain.
Developed nations industrialised early, possess potent militaries, and, through that power, have enriched themselves through the resources of weaker lands. For several hundred years, weaker countries sought to benefit from plentiful resources and abundant local labour yet remained economically poor. The news China released earlier this week indicates that this is starting to change.
The World Bank means this when its economists say, ” To displace China on the export side, countries must embrace China’s supply Chains.” Developing and underdeveloped nations are now taking a larger share of the profits from resources, products, and the labour required to make them.
For Consumers in developed nations, this means that if they want to buy products at their department stores, they might be able to avoid the Made in China label. Still, they can’t avoid the tag: “This product may contain components or materials from China.”
From a national security perspective, it’s already been highlighted that there will be a shortage of materials. These include titanium, tungsten, lithium and cobalt. These shortages can’t be filled locally as they don’t have the resources; they need to go to the places we have been calling the Global South to buy products from them. However, when they do, they will buy many of these through processing plants built in China using Chinese loans. Shortages of materials to make ammunition for their weapons have been reported by Defense News in the USA, and the reason for that shortage is that they are reliant on China for many products.
For example, China produces 77% of the world’s cobalt, while the Democratic Republic of Congo controls most of the rest. The largest company mining cobalt in the DRC is Eurasian Resources Group, whose processing plant is a Belt and Road Initiative investment. The second largest producer is Tenke Fungurume, a Chinese-owned organisation.
China is building, or has built, ports in Africa; one report suggests that China has either a financial interest, an operational role or total control of as many as 63 ports throughout Africa. As Deborah Brautigam pointed out, this situation is not to entrap Africans into debt or gain control but to enhance mutually beneficial trade between Africa and China.
It also ensures that if the Developed World wants to trade with Africa, they will almost certainly be doing so through ports that have at least some degree of influence or control from China and on ships that China will almost certainly build in the future because that’s another place where China is showing incredible growth – the profits of China’s significant shipbuilders increased by an astounding 131% last year as they upped orders and rose to number one of the world’s shipbuilding countries.
Every ship that leaves an African port with products bound for anywhere else in the world does so to benefit the country it leaves through export tax, shipping, handling, and transportation fees, which remain in the country as the products depart.
Asia and Africa aren’t the only places it’s happening, South and Central America, the Pacific Island Nations are all experiencing growth ins trade and strengthening relations with China.
This is good news for China and equally good news for much of the Developing World, but it must be a worrying sign that changes are needed to avoid a new term entering the lexicon: the Declining World.
