Strengthening China's oversupply, competing with the 'overproduction panic' system of major capital countries

Strengthening China's oversupply, competing with the 'overproduction panic' system of major capital countries

 

In response to China's government-led excessive factory investment, the IMF issued a statement saying, "Growth will slow to 3.3% in 2029," and the Chinese government registered an additional $34 billion as a semiconductor big fund.

As a strategy to strengthen oversupply, China is pressuring the oversupply of advanced industrial systems in large capital countries, showing competition in productivity during the downturn of the financial crisis.
In the 1980s, when the Cold War was intensifying, the U.S. Reaganomics put pressure on the Soviet system by breaking the backbone of the socialist economic system with slow productivity due to the accelerated production of electronics and the supply superiority of heavy industry communist countries through the arms race, and Soviet perestroika provided periodic supply from major capital countries during the heavy industry period. China, with its strategy of 'financial crisis leading to panic' in the economic cycle due to the excessive trend, attempted a periodical response strategy of 'economic recession due to overproduction in large capital countries in the 2010s' as a long-term development strategy for the past 80 years.
Due to this oversupply pressure, China is responding to the economic cycle of financial crisis and sharp economic downturn in large capital countries.
The IMF said in a statement on the 29th that China's economic growth rate will slow to 3.3% by 2029, and raised its forecast 6 weeks ago by 0.4%p each year to 5% growth this year and 4.5% growth in 2025.
The IMF statement called on China to roll back policies that help its manufacturers.
“China’s use of industrial policy to support priority sectors could lead to misallocation of domestic resources and potentially impact its trading partners,” the IMF said. “Comprehensive measures must be taken to prevent its weakening,” he said.
As an alternative, the IMF recommended “long-term efforts to strengthen the social safety net and service sector.”
China registered its third state-backed investment fund in the semiconductor industry with a capital of 344 billion yuan ($34 billion) in the state-owned enterprise register on the 24th.
The semiconductor fund under the Chinese government's 2015 policy, 'Made in China 2025', is the third 'Big Fund' following the first 140 billion yuan to 200 billion yuan for the second (2019). is focused on
In accordance with China's semiconductor self-sufficiency strategy, the Ministry of Finance is the largest shareholder with a 17% stake and paid-up capital of 60 billion yuan, and China Development Bank Capital is the second largest shareholder with a 10.5% stake.
Seventeen institutions, including China's five largest banks - Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Bank of Communications - each invested 6% of total capital.
China has already built 4 million new apartments through fruitful investment, but they have not been sold, and as insolvency has grown due to the interest burden, local governments have announced bulk purchases, and massive investments have been made in electric vehicle and solar panel factories, which dominate the global market other than housing this year. Focused investment.
Industrial lending soared from $83 billion annually in 2019 to $670 billion last year, citing data from China's central bank.
Ten years ago, under China's mid-term development strategy 'Made in China 2025', state-owned banks provided loans for factory investment in accordance with the policy of replacing major imported goods in 10 high-tech manufacturing industries with their own production.
NYT said, “According to the United Nations Industrial Development Organization (UNIDO), China already produces almost a third of the world’s manufactured goods, which is more than the combined production of the United States, Germany, Japan, Korea, and the United Kingdom.” “The trade surplus for these products is equivalent to that of China’s entire economy.” “It corresponds to 1 in 10,” he said in the issue on the 14th.
Regarding the Chinese market governance structure for solar panels, “From 2008 to 2012, as China’s solar panel manufacturing capacity expanded tenfold, global solar panel prices fell 75% and many factories in the U.S. and Europe closed.” “China’s three largest solar panel producers have suffered financial collapse due to plummeting prices, banks have taken on loan losses, and smaller Chinese competitors have been purchasing factories at a fraction of the original construction costs, allowing these second-generation companies to produce panels. “We are producing it more cheaply and investing in cutting-edge research,” the NYT said.
As Chinese companies are responsible for almost all solar panel production around the world, exports have doubled over the past four years, reaching $44 billion in solar cell exports last year.
On the other hand, although China has already doubled its exports of solar wafers, a key component, the total amount of China's solar exports decreased slightly last year as the price of solar products fell by almost half.
NYT said, “China’s entry into overseas markets has increased fivefold over the past four years, and solar panels dominate the global market,” and “exports of labor-intensive industries such as furniture manufacturing, which were once expected to be lost to low-wage countries, are also rapidly increasing. “There is,” he said.
Car and ship exports are intertwined, with China rapidly growing into the world's largest car exporter in just four years, exporting about 5 million cars last year, and building 170 ships to export cars across oceans, including to Europe, with ships themselves becoming a major export product. In the first quarter of this year, it more than doubled compared to the same period last year.
Regarding the Chinese-dominated battery market, NYT said, “Multinational automakers initially responded by putting pressure on Korean suppliers, who led the electric vehicle battery industry to build factories in China, and China responded in 2016 by banning Chinese companies even for Chinese-made electric vehicles. “We declared that we can only receive consumer subsidies if we use batteries from our own factories,” he said. “Hyundai Motors gave up on the Chinese factories of Korean battery manufacturers and switched to contracting with Chinese battery companies such as CATL.”
An Atlantic Council report found that China's lithium-ion battery exports more than quadrupled from $13 billion in 2019 to $65 billion last year.
Two-thirds of China's battery exports went to Europe and North America and the remainder to East Asia, and Chinese companies currently produce most of the world's electric vehicle batteries.
China's export surge was led by manufacturing and exports, growing faster than expected with an annual rate of 6.6% in the first quarter of this year.
The NYT diagnosed that China's manufacturing investment and export support policies began as an escape from the housing financial crisis. Apartment construction was the driving force of the Chinese economy, but as the decades-long housing bubble burst and apartment prices plummeted, construction slowed sharply and dozens of 200,000 real estate developers have run out of funds due to financial crisis.
The Chinese government has implemented a strategy where strong overseas sales of industrial products and massive investment in factories to produce industrial products lead to offsetting China's housing crisis, and this is showing results early this year.
In addition to solar products, the European Union has added electric vehicles, wind turbines and medical devices to its preliminary trade restrictions on Chinese products.
Ahead of the election, the United States urged the Biden administration to significantly increase tariffs on Chinese steel and aluminum in addition to the former Trump administration's trade tariff measures.
As of last year, China had signed 21 free trade agreements with 29 countries.
China has increased its exports to Southeast Asia, including Vietnam and Thailand, by bypassing trade regulations from the U.S. and the EU, showing a 75% surge over the past four years.
China's economic data showed growth in April at the slowest pace since December 2022 during the pandemic, when retail sales were tightly controlled, and new home prices fell at the fastest pace in nine years.
Reuters said: “Recently released economic data for April, including factory output, trade and consumer prices, suggest that China's $18.6 trillion economy has successfully overcome near-term downside risks, but China watchers wonder whether this rebound is sustainable. “It is still difficult to make a judgment,” he said. “Domestic consumption is still sluggish, and the prolonged crisis in the real estate sector, which is the biggest obstacle to full-scale economic recovery, is weakening trust.”
“The Chinese company Shein has become adept at sending packages directly to homes in the U.S. while avoiding tariffs,” he said. “The U.S. allows residents to send up to 800 packages per day without paying tariffs.” It allows the import of dollar-worth of goods, which amounts to nearly $300,000 per year,” Reuters reported.
At an executive meeting chaired by Premier Li Qiang on the 25th, China's State Council adopted 'Opinions on expanding cross-border e-commerce exports and promoting the establishment of overseas logistics bases' and decided to expand financial support for nurturing e-commerce talent and building brands in the international market.
China's aggressive strategy to target low-cost overseas markets aims to foster companies that participate in cross-border e-commerce by establishing a logistics system with financial support.
China's total import and export volume last year was 2.38 trillion yuan, a 15.6% increase over the previous year.
“The necessary steps to put the sector on a more sustainable path should continue,” the IMF said of the Chinese government’s measures to stabilize its embattled real estate sector.