World wakes up to Chinese predatory mercantilism – Firstpost
January 2025 has proved to be a crucial month for global politics as Donald Trump has been inaugurated as the president of the United States for a second term now. In his previous term, Trump had emerged as the harshest critic of China’s predatory behaviour in trade, for which he also took necessary actions besides investing an incredible amount of effort in shoring up a counter to the country in the Indo-Pacific.
With Trump’s return to the White House, the nightmare is back for China, where there were early reports of him bringing a 60 per cent tariff increase against Chinese products. By all means possible, China indeed is going to be the primary target of Trump 2.0. But this is not what we are going to focus on in the rest of the piece. While Trump’s response to Beijing’s economic rise and the challenge that it poses to American hegemony would be definitely interesting to watch, this piece is more about the subdued yet very real trouble that China’s predatory behaviour has invited for itself from developing countries.
As per a report published in the South China Morning Post, as many as 28 trading partners of China have launched trade investigations against the country in 2024, a sharp increase from just 18 in 2023. The total number of cases has also increased to 160 trade investigations last year as against 69 in 2023. What’s shocking is that a large number of these cases have been filed by developing countries, including Thailand, Peru, and even its close friend Pakistan.
In fact, India has emerged as the largest initiator of trade investigations against China, accounting for almost one-fourth of all the cases. This makes perfect sense because despite the cooling down of tensions between India and China at the LAC, the Modi government has not lost sight of the strategic challenge that China is. In the last decade, this government has taken many measures to position India as a global manufacturing hub, and that obviously requires it to protect its domestic industries from a Chinese onslaught.
Picture this: between January and September 2024, almost half of the investigations that were launched by India into allegations of dumping were against just one country, the People’s Republic of China. These investigations are undertaken after complaints from domestic manufacturers that China’s predatory pricing is hurting their interests. They result in anti-dumping measures by India, where import duties on those products are increased, thus deterring their inflow into the country.
So far, the Modi government has imposed dumping duties on Chinese products in multiple categories, including aluminium products, chemicals, glass, and plastics. In fact, anti-dumping measures are not the only way in which this government is targeting Chinese products. It has also successfully wielded Quality Control Orders, or QCOs, to specifically target Chinese products such as toys, electronics, chemicals, plastics, etc.
These steps are in addition to an existing strategic ban in place that is there on Chinese equipment in sensitive sectors such as power, telecom, and infrastructure, especially with regard to their procurement for government use. India has also refused to allow Chinese FDI through the automatic route, a restriction that had kicked in after the Galwan Valley clash where all approvals are undertaken only on a case-by-case basis. Looking at the elaborate response by the Indian government to Chinese dumping machinery, one can say India is leading the charge globally as far as the developing world is concerned.
Unlike India and other developing countries that are today working hard to create an export-led model of growth, China had done it already, rising from a very modest share in the world’s manufacturing exports of just 3 per cent in 1995 to 20 per cent by 2020. As big as an achievement as it may seem, it was underwritten with a hidden cost for the countries that became addicted to China’s exports.
This is because the People’s Republic of China (PRC), as the country is officially known, is a staunch follower of predatory mercantilism. Mercantilism is a model of international political economy where a country approaches trade from the perspective of relative power dynamics. It prioritises its identity as an exporter of large-volume/high-value goods to exploit other countries as mere markets for its products. This leads to a lopsided trading equation where one party gains at the expense of the other. China has used this approach to become the quintessential factory of the world, where China is the main supplier and other countries are just traders or buyers.
In the last few decades, the PRC has perfected this art of mercantilism where it has deployed multiple strategies to capture markets abroad without giving reciprocal access to its own domestic market. This includes massive state subsidies to its domestic industries to create an unfair cost advantage over foreign competitors or by sometimes pricing its exports even below the cost of production. This oversupply of Chinese products creates a challenge for developing countries where their efforts to sustain jobs and domestic industries fall flat due to the availability of cheap Chinese alternatives.
This is exactly what India had witnessed between 2004 and 2014 when the UPA government had set back-to-back ambitious trade targets with China as part of PM Manmohan Singh’s vision to ensure friendly relations with the country. Although making it a stakeholder in India’s economy did not lead to any peace on the political front, China’s easy access to the Indian market did lead many domestic manufacturers to shut shop. Even today, China has a vast share in India’s imports, but it is because of the Make in India programme, where certain industries are dependent on China for intermediate parts and raw materials, and over time, it is expected that Indian manufacturers will replace China.
While India has a ‘Make in India’ programme to ace low-cost manufacturing, China has launched its Made in China 2025 programme, where it is now targeting high-end manufacturing to keep its economic machinery running. But the sad news for Beijing is that it is increasingly facing massive headwinds slowing down its economic growth. After a spillover from the property crisis, the domestic demand is at an all-time low, further exacerbated by an ageing population where dependents are going to be much more than breadwinners.
Amidst all these challenges, China is trying to deploy the age-old strategy of overproduction and oversupply to keep its growth rate afloat. Reports after reports are throwing up data that China has an overcapacity across multiple sectors, including electronic vehicles, batteries, and semiconductors, which it plans to dump in foreign markets. But what is going to disappoint China is that globally a consensus is now emerging around its industrial overcapacity problem that first started with steel and solar equipment and now includes EVs, batteries, and other sectors as well.
The world post-2024 is not willing to buy the Chinese snake oil of ‘shared prosperity through trade’ anymore. Trump has returned, and there are going to be many interesting moments in the US-China Trade War 2.0. What is also commendable is that India has also woken up to the challenge; the leader of the developing world is all ready to take on the predatory state-led capitalism of China, and other developing countries are also likely to follow suit.
The author is a New Delhi-based commentator on geopolitics and foreign policy. She holds a PhD from the Department of International Relations, South Asian University. She tweets @TrulyMonica. The views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.
Post Comment