Global markets on edge as China initiates "second wave" of exports

The world will face an influx of Chinese imports for the second time, as China increases the output of goods, exceeding domestic demand, Caliber.Az reports, citing The Wall Street Journal.

In a deja vu reminiscent of the late 1990s and early 2000s, the world is preparing for a resurgence of the "China shock" as China significantly increases its exports, surpassing domestic demand and causing ripples across international markets

During the initial "China shock" era, liberal reforms and China's entry into the World Trade Organization led to a flood of cheap Chinese-made goods in global markets. While this helped keep consumer prices low, it came at the expense of local industries, particularly in the United States, where many businesses went bankrupt.

Now, as China doubles down on exports, concerns are rising among Western countries. David Autor, an economics professor at the Massachusetts Institute of Technology, asserts that this time, the competition extends to high-tech products, intensifying the potential impact on global markets.

Unlike the earlier period, China's current economic slowdown adds a new dimension to the situation. State-directed loans are fueling Chinese companies to saturate foreign markets with products that surpass domestic demand. Economists warn that this "China shock 2.0" may push global inflation down even further than before, as China's demand for commodities, which offset the disinflationary effect in the past, is diminishing.

Notably, China's economic landscape has transformed since the first wave of the "China shock." In 2022, China accounted for 31% of global manufacturing output and 14% of all goods exports, a significant leap from less than 10% and 5%, respectively, two decades earlier. As the world braces for the impending influx of Chinese imports, the dynamics of this sequel to the "China shock" raise concerns about the potential impact on local industries and the global economy.