ReportAUGUST 17, 2024

Chinese Dubious Economic Activities around the Globe

Team Red Lantern Analytica

Directorate of Intelligence

Economic measures have been used as a tactic to exert influence over policies and politics since early times. In the present world, economic activities are wielded as weapons through sanctions, tariffs, debt diplomacy, protectionist approaches, etc. These are employed to gain geopolitical interests, manipulate policies and trade and shape contemporary global dynamics. One country that is infamous for employing unfair trade practices is China. Through unfair trade measures like dumping and intellectual property theft, market access limitations, and debt diplomacy, China uses economic measures as weapons. It gains economic advantages through the use of subsidies and state-owned firms. It also uses investments to exercise influence, inciting geopolitical crises and upending international conventions. China’s such practices have raised concerns among many economic hubs like the European Union (EU), Indo-Pacific, Africa, United States (US), etc. China has 60 per cent of global manufacturing capacity, 31 per cent of global production and 14 per cent of global consumption. Its extensive manufacturing surplus capacity, which is fueled by significant state expenditure and subsidies, is escalating tensions between its state-led economic model and Western market-oriented capitalism. Foreign governments, particularly those in the EU, are urging China to relax its industrial restrictions and focus more on its domestic market. However, China’s ambitious ‘Made in China 2025’ strategy seeks to dominate vital industries worldwide, exacerbating trade tensions.[1] Here, we look at recent reports on China’s dubious economic activity over the last few months.

In Europe

The European Union has announced proposals to bolster the bloc’s economic security, including safeguards to prevent critical technology from straying into the hands of geopolitical adversaries such as China.[2] According to news reports in early December 2023, European countries, especially Germany and France, have taken steps to scrutinize and restrict Chinese Foreign Direct Investment (FDI), affecting the technology and infrastructure industries. Germany is planning to tighten investment screening procedures to prevent Chinese companies from accessing industries deemed critical to national security. This decision comes amid concerns expressed about China’s growing influence in Germany. The drop in Chinese FDI in Europe in 2022, along with an increase in greenfield investments in industries such as electric vehicles, indicates the shifting landscape for Chinese businesses in the region.[3]

Moreover, on 6 December 2023, China rejected the European Commission President Ursula von der Leyen’s criticism of the EU’s trade deficit with China, claiming that export limitations to China are partially to blame for the imbalance. Wang Wenbin, a spokesman for the foreign ministry, said that the EU shouldn’t be restricting high-tech exports when it hopes to boost exports to China.[4]

On the other hand, the European solar manufacturing industry is facing significant challenges due to increased competition from Chinese manufacturers. The rush to adopt solar power in Europe has led to a surge in demand for solar panels, but the majority of these panels are being supplied by Chinese companies that benefit from government subsidies. This has resulted in a decline in European solar manufacturing firms, as they struggle to compete on cost.[5] In late January 2024, there were reports that Meyer Burger, a Swiss solar panel manufacturer was suffering against Chinese competition and warned that without government backing, its German production unit could close. Gunter Erfurt, the CEO, accused Chinese manufacturers of deliberately lowering costs through targeted subsidies. This situation highlights Chinese overcapacity flooding the EU market resulting in trade disputes.[6]

In Indo-Pacific

According to reports in early February, the US deployed three aircraft carriers to the western Pacific to step up measures to deter China and North Korea. This decision, despite the concerns in West Asia, demonstrates the commitment to the Indo-Pacific. The US Navy and Japan conducted joint training exercises in the Philippine Sea, involving the USS Carl Vinson, USS Theodore Roosevelt, and Japanese helicopter destroyer JS Ise. The deployment is the first time in two years that three US carriers have come near the first island chain. The deployment aims to strengthen deterrence and reassure allies amid regional concerns, notably around Taiwan and North Korea. Moreover, the US continues to prioritize trilateral collaboration with Japan and South Korea for addressing regional security problems.[7]

Furthermore, the US has announced that it will resume its Peace Corps program in Palau in 2025. The move is in line with recent efforts to enhance cooperation and engagement with Pacific island nations to counter growing Chinese influence in the region.[8]

Additionally, Richard Verma, the Deputy Secretary of State for the US, warned Papua New Guinea (PNG) that any security assurance with Beijing has costs and repercussions and advised PNG to decline China’s offer of a possible security pact. This came in response to an earlier announcement from PNG’s Foreign Minister, Justin Tkachenko, that PNG is in early discussions with China regarding a security deal, which includes assistance in police force training, equipment, and surveillance technology. The US and Australia view the Pacific as their sphere of influence and are working to discourage Pacific island nations from forming security ties with China, especially after China signed a security pact with the Solomon Islands in 2022.[9]

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Team Red Lantern AnalyticaAnalyst

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