China’s industry is growing rapidly, making several Western economic officials fear another overproduction wave.
China’s industrial profits edged up again in April after a slump in the previous months, the National Bureau of Statistics highlighted on Monday. Manufacturing and service output in the world’s second-largest economy have yet to regain momentum after disappointing post-COVID growth last year.
Companies with over 20 million yuan (2.3 million USD) reported overall profit growth of 4% year-on-year in April. In March, the same value declined by 3.5% compared to the same period one year before.
In the first quarter of 2024, China’s industrial profits increased by 4.3%, exactly the same as in Q1 2023.
Imports and exports in the Asian giant are slowly rebounding after a stagnating 2023. In early 2024, trading activity to and from China expanded far more than expected. The positive outcome was however followed by another disappointing report in March and April.
In April, China’s exports expanded by 1.5%, less than expected.
However, analysts believe China’s industrial production is expanding at such a pace to project short-term export growth. April’s industrial production increased by 6.7%.
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Overproduction fear
As China’s production capacity soars again, Western economies fear another invasion of cheap Chinese products.
The Chinese economy is focusing on the production of the “new three” competitive products, as detailed during the annual “Two Sessions” business meeting in March. The “new three” are lithium-ion batteries, solar panels, and electric vehicles. Although April’s production data doesn’t show an immediate spike, analysts believe it will exponentially increase in the following months.
Last week, the Biden administration enforced a 100% tariff on Chinese electric vehicles (EVs), quadrupling the barriers already in place. The same measure included tariffs against semiconductors, solar panels, wind turbines, and other products as well.
The European Union also began an investigation probe into China’s EV subsidies. According to the EU Commission, China is using its cheap labor prices and unfair market position to dominate Europe in a strategic industry. The European car industry is one of the largest in the world, with legacy brands like Volkswagen, Mercedes, BMW, and more.
These fears may not be substantiated by facts, at least for the moment. China’s economy is grappling with a back-breaking real estate market crisis, which is putting the country’s growth into question.
The Chinese government only recently approved a measure package to salvage the domestic real estate market, but analysts believe it’s too little too late. How much the real estate crisis will impact China’s economy is unclear, but it will almost definitely be significant.
