Starting last fall, China’s trade picture changed dramatically. Imports in fact have skyrocketed along with China’s overall exports, and China is sitting on such a remarkable trade surplus that it’s making China’s partners across the world nervous. In the last three months before October, imports from Australia increased by 18 percent. This is a 25 percent increase when compared to the same period last year. At the same time, China’s imports have declined, reaping an astounding trade surplus. According to the country’s customs agency, this surplus has now exceeded $US1 trillion for the year through November.
At a recent Detroit meeting, International Monetary Fund, World Trade Organization, and World Bank leaders sat down. There, China’s Premier Li Qiang sounded a note of concern over what the expanding surplus may portend. Tied up in the back-and-forth were his concerns about the repercussions of such tariffs, which he characterized as “mutually destructive.” The comments are a part of intensifying rhetoric and concern over trade state policies, especially towards the European Union.
Escalating Trade Disputes
China’s leader, Xi Jinping, faces increasing pressure over the country’s trade practices. Emmanuel Macron, President of France, has spoken out clearly urging Xi to recognize the corrosive affect that China’s massive trade surplus is having on European economies. He stated, “China is hitting the heart of the European industrial and innovation model.” Macron’s warning has underscored the dangerous trade surplus that China currently enjoys with the European Union. This temporary condition has fueled concerns of major market distortions.
In doing so, Macron has conveyed an unequivocal message to China: fix these problems. If not, Europe has little option but to act firmly. “I told [China] that if they don’t react, we Europeans will be forced to take strong measures in the coming months,” he remarked, indicating a potential escalation in the ongoing tariff dispute.
Shifting Trade Patterns
Exports to the U.S. have fallen almost 20 percent since former President Donald Trump imposed tariffs earlier this year. In retaliation, China has swiftly turned its focus on to alternative markets in Europe, Africa, Southeast Asia and Australia. Such an approach has provided China with insulation from losses in U.S. demand while simultaneously magnifying their global economic influence.
Yet domestic political pressures keep China’s export-driven economy stubbornly anchored to its established model. Even in light of the shifting realities in global trade, it reeks of stubbornness to change. The country is inundating markets in every region with its exports. This step deepens its claims as the central node for trade around the world.
Future Diplomatic Engagements
Next year, Britain’s Prime Minister Sir Keir Starmer is expected to make a visit to China in early 2024. This visit offers an invaluable opportunity for improved trade relations. We can finally pursue enforcement measures that do not hurt long-standing relationships between countries. Future trade leaders are doing the same under very complicated trade regimes. A recent meeting between Donald Trump and Xi Jinping in South Korea is the latest example of these continued attempts.
