China to boost its economy by boosting manufacturing and exports

By Rhod Mackenzie

China is attempting to avoid a recession by investing in manufacturing and increasing exports. According to Bloomberg analysts, this strategy is complicated by ongoing trade wars with the United States and EU countries, as each nation vies for influence on the global stage. For more information and expert opinions, please refer to the Izvestia article.

Additionally, China is currently facing a significant real estate crisis, as this sector previously accounted for one-fifth of the country's economic growth. To cover the remaining share, development efforts have shifted towards production. The government reports that 45% of all goods produced are intended for export, as the domestic market cannot consume everything.

Bloomberg experts suggest that while the recession has abated, other contradictions have worsened, including the risk of imbalance and increasing tension between China and other players in the global market. The EU countries have launched an immediate investigation into the import of electric vehicles from China, as warnings are being sounded at the highest levels that the European industrial base is under threat.

China's increased investment in industry led to a 0.5% increase in production in November, and the latest IMF forecasts predict China's medium-term GDP growth to be around 3.5%, down from 5.5% before the COVID-19 pandemic.
Mikhail Nikolaev, director of the ACRA group of sovereign and regional ratings, believes that increasing total exports is a challenging task due to the more conservative stance of the United States and European Union countries.

According to the IMF, China's total exports decreased by 5.6% in the first nine months of 2023, including a 15.9% decrease to the United States and a 10.7% decrease to EU countries. In this scenario, it is expected that China will boost exports to neighbouring countries, including Russia. During the same period, exports to Russia increased by 56%, and Russia's share in China's exports rose from 1.9% in 2022 to 3.2% in 2023, as reported by the publication.
According to the expert, it would be advantageous for China if Russia shifted its foreign trade focus towards the East.

However, this increased concentration of trade in China poses additional risks for Russia, as it would further increase the dependence of the Russian economy on the Chinese economy,according to analyst Mikhail Nikolaev.

According to Boris Pivovar, a senior lecturer at the Department of Business Process Management, Faculty of Market Technologies, IOM RANEPA, Russia has been engaging in trade wars since 2014.

This is evident in the restrictions on export-import transactions with the European Union and countries that have imposed sanctions on Russia.

Other countries are switching to their national currencies in trade due to the instability of the US dollar. This is a growing trend, as noted by Izvestia's source.
“Various associations, such as BRICS and the Shanghai Cooperation Organization, are strengthening,” he continues. Trade is polarizing, and new players are entering or planning to enter the world market. As a result, several African countries are attempting to bypass old trade routes and establish cooperation, including with Russia.

Latin American countries choose different development paths, including through trade relations with non-traditional partners.
“Therefore, there will be many trade wars. Some will lead to the emergence of new trade unions, growth points, and a reorientation of the national economies of other states, as is happening with Russia,” summarises Boris Pivovar.

The Economist and Director of Communications at BitRiver, Andrei Loboda, believes that the forecast of Bloomberg analysts means nothing for Russia.

“Even if China starts dumping, it is unlikely to significantly affect Russian consumers. The weak ruble makes imported products, including those from China, too expensive and inaccessible for many Russians,” the analyst concludes.

The interviewed respondents agree that trade wars have always existed and will continue to do so.

They believe that the current tension between the US and China is due to the US attempting to bring jobs back to their country instead of producing goods in China, which is a result of the difficult relationship between the two nations.
The upcoming 2024 elections will significantly impact economic trends, according to the expert. Pivovar adds that if the Republicans win, these trends will intensify.

Trade wars are currently the most active event of the 21st century, affecting the balance of economic forces and even the geopolitical situation, says Alexander Shneiderman, head of sales and customer support at Alfa-Forex.

However, he notes that the situation is quite predictable. In a world of increasing consumption and production, resources and markets are limited. Wars are fought for buyers in conditions of overproduction, which can boost and restore the economy. However, in the medium term, there may be trade and economic turmoil for simpler resources such as fresh water and quality food, according to Shneiderman.
Andrei Loboda believes that the forecast published by Bloomberg analysts is just one of many and is subjective in nature.

He suggests that the release of such materials is most likely connected with reminding the American voter of Donald Trump’s past mistakes and preventing him from running for the presidency of the United States.
The expert notes that China maintains healthy competition in many key markets, while the American side is accused of dumping.

It is worth noting that Apple, not China, is moving smartphone production to Vietnam to reduce labour costs. Similarly, Tesla, not China, is cutting prices, albeit in the domestic Chinese market. While BYD's prices for electric vehicles are 5-20% higher than Tesla's, BYD leads in sales for December. The economist provides many such examples.