Font size:
Print
CHINA Shock 2.0
Context:
The US has implemented significant tariff hikes on Chinese imports, including a 100% duty on electric vehicles, 50% on solar cells, and 25% on steel, aluminium, EV batteries, and certain minerals. This move, part of efforts to counter the “China Shock 2.0”.
China Shock 1.0 (Post 2000):
- About:Coined by economists the “China Shock ” refers to the sizable increase in Chinese imports into the United States in the 2000s, after China joining WTO.
- Impact on the USA: Eliminated more than 2 million American jobs and During the 2000s it hollowed out America’s manufacturing base.
- In US policy circles, the “China Shock” is often portrayed as a massive error that devastated towns across the Rust Belt and led to a sharp increase in inequality.
- Impact on China: China’s GDP has grown more than 15 times since then.
- The Impact on India India’s dependence on Chinese imports grew rapidly. Imports from China soared from $10.87 billion in 2005-06 to $61.71 billion in 2015-16, disrupting domestic manufacturing.
Reasons for China Shock 1.0:
- Clinton’s WTO Gamble: Bill Clinton, the U.S President backed China’s accession to the WTO, believing it would promote political reform and increased economic freedom in Beijing.
-
Trump’s Trade War in Response to China Shock 1.0:In 2018, U.S. President Donald Trump initiated a trade war with China, aiming to address the economic imbalance caused by the China Shock.
|
China shock 2.0(Present times )
- China is pivoting to new growth drivers in solar cells, electric vehicles, and lithium-ion batteries to drive its economy and export.
- The country is also developing global supply chains for critical raw materials, such as rare earths, that are set to supply these industries.
- China’s exports surged significantly in the post Covid period compared with the pre-pandemic period.
- Impact on India:Despite economic measures against China post-Galwan clash, India’s imports from China surpassed $100 billion in 2023-24 from $70 billion in FY19.
Key Impacts of China Shock 2.0 on India
- Block on India’s Access to Solar Equipment: China has restricted India’s access to solar equipment in retaliation to anti-dumping probes, posing a challenge to India’s renewable energy goals.
- Surge in Chinese Steel Imports: Chinese steel imports to India have reached a seven-year high, undermining profits in the Indian steel industry, with calls for anti-dumping measures.
- India’s Dependency on Chinese Electronics: Despite advancements in mobile phone exports, India remains heavily reliant on China for electronic components, with imports exceeding $12 billion in FY24.
Reasons for Present China Shock 2.0:
- Chinese Export Ambition: Driven by China’s ambition to move up the export value chain to high-tech sectors such as solar equipment, electric vehicles, and semiconductors.
- The slowdown in the Chinese economy and trade wars internationally.
Steps taken by countries to counter China Shock 2.0:
- Anti-Dumping Duty: In 2024 alone, India imposed over 30 anti-dumping investigations against China, the most against any country.
- Onshoring
-
-
- Definition: Bringing production back to a company’s home country.
-
-
-
- Example: U.S. Semiconductor Production
-
- The U.S., concerned about dependence on China and Taiwan for semiconductors, passed the CHIPS Act (2022) to boost domestic chip manufacturing. Companies like Intel are investing in U.S. plants to reduce reliance on China.
- Reshoring
-
-
- Definition: Bringing back jobs and production previously outsourced to foreign countries.
-
-
-
- Example: Apple’s Reshoring from China
-
- Deglobalisation
-
-
- Definition: Reducing global economic interconnectedness, focusing more on national economies.
-
-
-
- Example: U.S.-China Trade War
-
- Slowbalisation
-
-
- Definition: The slowdown in the pace of globalisation, though not a complete reversal.
-
-
-
- Example: Global Slowdown Post-2008 Crisis
-
- Friendshoring
-
-
- Definition: Moving supply chains to politically allied nations to reduce reliance on rivals.
-
-
-
- Example: U.S. and Japan Diversifying Away from China.
-
