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Opinion | Amid US de-risking talk, as the world relies more on China’s exports, China is learning to rely more on itself
- Despite US-led curbs, China is exporting more to the world than before, growing its share of global manufacturing
- At the same time, its domestic economy is less dependent on foreign investment and exports
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Led by calls from the United States, the G7 summit in Hiroshima, Japan, highlighted a need to reduce the Group of Seven nations’ dependency on China for critical goods and shift their supply chains towards friendlier nations. Senior US officials laboured to point out that the intention was not to decouple but to de-risk.
This represents a shift from former US president Donald Trump’s fixation on curbing the trade deficit with tariffs after he took office in 2017. President Joe Biden’s foreign policy has been guided by the theme of protecting America’s middle-class workers. He has added more restrictions on China’s access to US hi-tech products and curbed financial relations. Beijing sees these measures as a threat to China’s technological ambitions and growth prospects.
So far, Washington’s actions have little to show for results. According to official US data, America’s merchandise trade deficit with China was larger last year than when Trump took office, and the overall trade deficit is at a record high. Moreover, US imports of manufactured goods have not moderated, with import penetration rising to 34 per cent from 31 per cent in 2017.
But there has been a dramatic decline in China’s importance to US trade. China accounted for 47 per cent of the US trade deficit in 2017, but just 32 per cent last year. US imports increased by about US$900 billion from 2017 to 2022, but China’s share declined from 22 per cent to 17 per cent.
Meanwhile, China’s exports to the world have risen to record highs in recent years. China may be exporting less directly to the US, but it is exporting more indirectly – supplying key inputs to other countries that have stepped up exports to the US, especially Vietnam and Mexico. China’s exports to Vietnam, for example, have more than doubled since 2017, nearly tripling the trade surplus to US$60 billion last year.
China’s exports to Mexico also increased, by nearly 30 per cent last year, amid a surge in foreign investment by Chinese companies seeking tariff-free access to the US market. Hisense, for example, has poured US$260 million into a home appliance park in Mexico while Growatt, a solar equipment maker, has established a factory in Vietnam.
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