What's happening in Mediterranean & Africa

 

Eng

As tensions rise between China and the US, Beijing turns to Europe with offers to purchase EU goods

As the decoupling of the US and Chinese economies proceeds with declining Asian imports being sourced in China by American importers, Beijing has been compelled to look to Europe.

Pulitzer Prize-winning author and energy expert Daniel Yergin in his book, “The New Map: Energy, Climate, and the Clash of Nations,” notes that container shipping, that enabled China’s meteoric rise, and gave birth to globalisation, is now being profoundly impacted by the declines, and faces a world of rising geopolitical tension and one less hospitable to global trade and lengthy supply chains.

This is revealed with average global container growth rates having been decelerated to less than one per cent between 2015 and 2020, versus nearly nine per cent between 2001 and 2005, according to data from IHS Markit.

While the US has drawn its wagons in a circle, amplifying complaints against China's Orwellian totalitarianism, Muslim concentration camps, religious persecution as well as the revival Communist Party discipline, an unrepentant Beijing now seeks relief from Europe.

But this time, not so much from Chinese exports as in the past. The new plan is to buy European imports, to bolster a self-sustaining Chinese domestic economy. It has long been the desire of Chinese central planners to replace the nation's export-led economy with one that is self-sustaining, one driven by internal domestic demand. High-tech imports are viewed as tools to build such an economy based on domestic sustainability.

"While European companies have placed much confidence in the market of China, a country that has been continuously opening up and has become the only major economy projected by the World Bank to achieve positive growth this year, Chinese businesses have voiced their concerns over the overall business environment in the EU affected by the Covid-19 pandemic," said a major state media (CCTV) article on the subject.

The paper points out that the EU's imports from China increased 4.9 per cent year on year in the January-July period, according to Eurostat.

According to the Federal Statistical Office of Germany, the largest economy in the EU, China, Germany's biggest trading partner since 2016, surpassed the United States for the first time in the second quarter of this year to become Germany's largest export market, and Germany's exports to China in July have rebounded almost to last year's level.

Gao Feng, spokesman of China's Ministry of Commerce, said the rapid development of Sino-German trade has benefited from not only the sound bilateral relations and complementary economic advantages of the two countries, but also from China's continuous opening-up.

While the situation in many of Germany's export markets is deteriorating, "the Chinese economy is already looking ahead with cautious optimism", said Galina Kolev, senior economist and head of the Cambridge-based Research Group Macroeconomic Analyses and Business Cycles.

Chinese economic growth, which has remained relatively high by international standards amid the pandemic, has made China an "attractive export market," Ms Kolev said.

Besides, China has also been one of Spain's top trading partners during the pandemic, according to Jorge Valera, director of Strategic Accounts and Rail at the Barcelona branch of transport company DSV.

"Without doubt, China was our biggest partner during the coronavirus pandemic. The majority of supplies, if not 100 per cent of them, arrived from China," Mr Valera told Xinhua.

But if container shipping rode the wave of China’s emergence, set in motion by the global consensus around trade represented by the creation of the WTO in 1995, the industry must now confront a potentially very different geopolitical future taking shape with almost daily developments chronicling deterioration in US-China relations.

If containerisation really underpinned growth of the global economy, one of the themes of the book is the risk to globalisation that comes from rising geopolitical tensions, particularly involving China and the US, which in the past months have really accelerated, Mr Yergin said.

To a great extent, the trends he identifies in his book, “The New Map", are already well under way and seen clearly in container shipping data. The breakneck pace at which China became a manufacturing powerhouse after its WTO entry has long since slowed.

Container lines have responded by drastically scaling back ship orders and cut capacity in response to changes in demand, which has contributed to the bottlenecks seen in recent weeks at major ports such as Felixstowe, Los Angeles and Long Beach.

As companies have diversified their sourcing, China, although still the dominant source country for consumer goods, has steadily slipped as the origin of US containerised imports as manufacturing migrates to Vietnam, Indonesia, Bangladesh, India, and other countries in South Asia.

The percentage of Asia-origin containers arriving in the US from North Asia (including China, Japan, and Korea) versus South Asia has dropped from 86 per cent to 76 per cent since 2005, as trade with South Asian nations has expanded, according to IHS Markit.

But the forces working against globalisation in which container shipping has thrived are growing stronger. “Momentum towards a more collaborative world order that rested on an increasingly connected global economy is in reverse,” Mr Yergin said. “The world has become more fractured, with a resurgence of nationalism and populism and distrust, great power competition, and with a rising politics of suspicion and resentment.”

* - Indicate required field(s).
Is China's pitch for European exports a mere gambit to have the EU be obliged to buy even more exports from Chinese factories? Who are the players here and what are their aims and objectives?

* Message :

* Email :  

 

Mediterranean & Africa
Trade Specialists