The head of the US Treasury called China’s excess production capacity a problem

Washington asks Beijing to cut production. Western analysts fear a new “Chinese shock.” During her visit to China, US Treasury Secretary Janet Yellen called China’s excess production capacity a problem. She paid special attention to the production of electric vehicles, batteries, solar panels and semiconductors. There is insufficient demand for these goods within the country, and prices on world markets are beginning to decline. Against this background, analysts again began to talk about the “Chinese shock.” This was the name given to the sudden influx of cheap Chinese products into the West, which occurred in the late 1990s and early 2000s. But if back then we were talking about consumer goods, now China is capable of exporting high technologies.

Should we expect a new “Chinese shock” and does it threaten Russia? Alexey Portansky, a professor at the Higher School of Economics and a leading researcher at the Institute of World Economy and International Relations of the Russian Academy of Sciences, answered these questions for Kommersant FM: “The economic difficulties that China is currently experiencing do not leave much choice for the PRC leadership to solve these problems. It seems that they are inclined to enter the foreign market in a new wave, offering goods of modern production, and not what they offered in the late 1990s and early 2000s. I believe they are considering this scenario, which worries the Western world.

The West will protect its economies from Chinese goods; in fact, this is already happening. We remember the restrictions on technology companies, for example, Huawei, ZTE, restrictions on the supply of semiconductors to China. At the same time, their markets remain open. The markets of, say, the United States are much more open than Russian ones in relation to any goods, including Chinese ones. Building a barrier will involve a departure from international trade rules. The West is not always and not everywhere ready for this.

As for Russia, our duties on Chinese goods are established in accordance with our obligations upon joining the World Trade Organization. And the duties there are in any case higher than, for example, in the United States or the European Union. So in this sense, we are a little more protected than Western countries. But at the same time, if there is a massive influx, and the Chinese agree to supply at the existing level of import duties, then it will probably be sensitive.”

According to The Wall Street Journal, the first “Chinese shock” cost the American economy 2 million jobs. The newspaper’s interlocutors warn that this time the situation could be much more serious. However, the director of the Institute of International Economics and Finance, Alexander Knobel, considers the fears exaggerated:

“A shock usually means some kind of sharp change in the situation, as happened in the 1990s, when China very quickly entered world markets with new products. But now there will be no dramatic change, because the PRC can no longer grow at the rate at which it was growing at that time. Growth will be slow but steady. And China, naturally, is trying to consolidate its position both in the global market for goods and services and in the technology market.

If we manage to obtain technologies not only from the United States and the European Union, but also from countries in the developing world, including China, this will, of course, contribute to the diversification of Russian industry and reduce the risks of interaction with the outside world.

Regarding the threat of dependence on Chinese imports, Russia can be threatened by any dependence on external goods and external technologies, so the development of its own technological base is a priority. But the more different foreign partners who provide opportunities for technological development, the better.”

Barclays predicts that China may cease to be the engine of global economic growth over the next five years. Analysts believe that by the beginning of the next decade, the country will be overtaken by India. Its GDP growth rate could accelerate to 9%, while China’s could slow down to 3.5%.

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Ilya Sizov