Cheap products from China "shock" the world economy

To solve its economic problems, China is increasing the production of goods that exceeds its domestic demand, the Wall Street Journal (WSJ) reported. Countries across the world will experience the second wave of Chinese imports. The previous wave of Chinese products resulted in bankruptcy of a number of factories in the West.

The world economy experienced the 'Chinese shock' 20 years ago, in the late 1990s and early 2000s, a surge of cheap products from the PRC. Economists believe that a repetition of the situation should be expected soon as Beijing increases exports to revive its economy. Chinese factories already produce more cars, consumer electronics and appliances than necessary for domestic consumption. During the first wave, an increase in exports helped China keep inflation in check. Economists expect that the deflationary effect will stronger the second time around, as it will not be compensated for by the Chinese demand for commodities.

The EU countries, the USA and Japan, unwilling to experience this situation again, have allocated billions to support industries and are also considering increasing duties on Chinese goods. According to economists, a repetition of the situation will have a more devastating effect as China is now competing in high-tech products.

In 2023, China's economy expanded by 5.2%, which is low by the country's standards. The performance of the Chinese trade in January through February significantly exceeded expectations: the exports year-on-year increased by 7.1% up to 528 billion dollars, and the imports by 3.5% up to 402.85 billion dollars. This is partly a consequence of the low base of the beginning of 2023, however, even taking this into account, analysts were expecting an average growth of exports by 1.9%, and the imports by 1.5%.