For all the considerations Washington and Americans rightly have about China and its regional and global agendas, that country’s economy is wasting influence, especially on the United States. Not long ago, China was America’s largest trading partner. Together, India and Southeast Asia are eclipsing China’s importance in this aspect of the Pacific. Part of this shift reflects growing hostility between Washington and Beijing, but the story is bigger than that. China has also lost a herbaceous result of its own development. Most likely, the decline will continue for the foreseeable future.
Recent reports from the Commerce Department tell much of the story. China accounted for just 13. 3% of all U. S. imports in the first six months of this year. This is down from a peak of 21. 6% in 2017 and the lowest since 2003, shortly thereafter. China joined the World Trade Organization (WTO). The ten most sensitive product groups tracked through Trade showed a declining percentage of China between 2022 and 2023. Even exports of toys and games, a mainstay of China-U. S. relations for decades, have lost a percentage of U. S. imports of those products. China’s loss in the electronics sector, something that is on Beijing’s agenda, is especially telling. The share of Chinese imports of U. S. electronics fell from 32% last year to 27. 9% in the early part of this year, a big update in a single year.
The figures released in Beijing verify the reading of the Ministry of Commerce. Overall, China’s exports fell 14. 5% in July from last year’s levels, a deterioration from the already worrying 12. 4% drop recorded in June. Shipments to the U. S. The U. S. led the fall. falling 23% from last year. Shipments to Europe and the Association of Southeast Asian Nations (ASEAN) fell 21% in July. Had the demands of sanctions-plagued Russia not increased China’s sales to the country by 52% from a year earlier in July, the scenario for the Chinese economy, still dependent on exports, would have been even more extreme.
Washington’s policies and statements largely explain this deterioration. In this sense, China’s disorders began in 2018, when President Donald Trump imposed price lists on a series of Chinese imports. Although Joe Biden seemed determined to roll back everything Trump had done, he kept the price lists in place after taking office in 2021. Stepping up Washington’s anti-Beijing rhetoric far beyond that of his predecessor, Biden has also set limits on certain U. S. exports to China and complex subsidies to any company producing semiconductors in China. That country. More recently, it has imposed limits on U. S. investment in Chinese technology. None of those policies have had a direct effect on Chinese exports to the United States, unless many Chinese exports, especially electronics, are dependent on imports. of spare parts from the United States.
But Washington’s hostility is not everything. Beijing has played a role in eroding China’s longstanding reputation as a reliable position to source goods. During the pandemic, Beijing has interfered with export sales of masks and other mandatory medical supplies. American, European and Japanese buyers lost even more confidence in the reliability of Chinese source when, years after the pandemic ended, Beijing’s Covid-zero policy halted production and shipping in a way that seemed arbitrary.
Rising prices in China are very important to this equation. Chinese wages have surpassed those in the West, as well as those in Japan, other parts of Asia and Latin America. According to the National Bureau of Statistics in Beijing, urban wages in China have risen more than the next five years at an average annual rate of 8. 6%. This is nearly double the average annual rate of wage expansion of 4. 4% in the United States. To be sure, U. S. wages are still much higher than Chinese wages, but the hole is much bigger. smaller than it was before and, in fact, less convincing to policymakers. The rise in Chinese prices has a main explanation for why Western and Japanese manufacturers and buyers are turning to India, for example, Latin America and Southeast Asia. Vietnam, the Philippines, Indonesia and Mexico, in particular, have attracted investment and diverted attention from China.
The current scenario demands that China replace its style of economic progression. For decades, it has relied on its reputation for reliable and reasonable production to drive expansion. Since this is no longer possible, China would do well to reorient its style of expansion toward greater dependence. in customer wishes and internal demands in general. In the past, Beijing has paid lip service to this need, but in practice, the country’s leaders have been more involved in replacement rhetoric than actual efforts to readjust the economy. This rhetoric ran counter to Xi Jinping’s equally stated purpose of becoming globally dominant in certain product areas. Given the contradictions of the past, it is far from transparent that Beijing is up to the challenge, even if it is clearly more urgent.