It seems that China’s leaders, in a bid to contemporise manufacturing, are funnelling money into the high-tech sector, which includes everything from semiconductors to electric vehicles (EVs). This can potentially result in overcapacity and trigger a spurt of cheap exports.
Could China’s high-tech manufacturing loans ring a warning bell for cheap exports
Experts typically look at the lending trends of China’s central bank to determine which sectors the government prioritises above others. A year-on-year comparison shows loans to the embattled Chinese property sector dropped by 0.2% while those to the manufacturing sector surged by 38.2%.
Financial analysts warn that although this may look similar to the uptick in capital investments in the solar panel industry, there are core differences. The mentioned funds fuelled the stated niche and instigated a trade fight that saw multiple companies closing their doors.
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Jens Eskelund Source: ECC China
Despite the differences, key trading partners – especially ones in Europe where Chinese EV subsidies are being investigated – are nervous in the wake of these changing lending patterns. Jens Eskelund, the president of the European Chamber of Commerce in Beijing, when talking about trade, noted:
There is currently lower consumption in China, but there is massive excess capacity that is being relocated around the world, including in batteries, solar and chemicals. Europe and China are like two trains that will collide.
At the Asia Pacific Economic Cooperation (APEC) forum, to be held in San Fransisco later this week, interested parties will discuss China’s industrial policy. Expectations are that US President Joe Biden and Chinese President Xi Jinping will meet during this event.
