textiles toys electronics for the last two decades the world has become accustomed to these carrying the label made in China but there are new categories of china-made goods dominating in the global Marketplace and it is causing discomfort China is now simply too large for the rest of the world to absorb this enormous capacity the overc capacity debate has sparked intense [Music] discussion our capacity Europe is also increasingly worried about the future of its high-tech Industries when byd is starting to sell more cars than BMW that is going to pose problems for China and German relations take the electric vehicle sector it is a crucial industry for the clean economy with a huge potential in Europe but Global markets are now flooded with cheaper Chinese electric cars as Beijing tries to export its way out of an economic slowdown what impact would it have on the rest of the world let me tell you something to China if you're listening presiden she those big monster car manufacturing plants that you're building in Mexico right now and you think you're going to get that you're going to not hire Americans and you're going to sell the cars to us now now if I don't get elected it's going to be a blood bath for the country globally green capacity is not excessive but in D scarcity the problem now is not over capacity but over anxiety and just how did China develop such a formidable Competitive Edge in the three clean tech industries of Eves solar panels and lithium ion batteries [Music] [Music] on the 9th of April 2024 Steel Workers protested outside Chile's presidential Palace to demand higher terorists on Chinese steel Imports according to data from the the Latin American Steel Association in 2023 the region imported a record 10 million tons of Chinese steel a 44% rise from the year before Chinese steel is almost 40% cheaper than what's made locally in 2024 Chile's biggest Steel company announced it is shutting [Music] down data from the World Bank shows China is the top exporter of Steel when measured by quantity Chile Mexico South Africa and Saudi Arabia have all taken action against China Steel exports over in the United States Steel has also become an election issue Chinese steel companies produce a lot more steel than China needs it ends up dumping extra Steel on the global market markets and unfairly low prices and the prices are unfairly low because China's steel companies don't need to worry about making a profit because the Chinese Governor subsidized them so heavily they're not competing they're cheating they're cheating and we've seen the damage here in America [Music] concluding her visit to China in April 2024 US Secretary of Treasury Janet y delivered these remarks China is now simply too large for the rest of the world to absorb this enormous capacity actions taken by the PRC today can shift World prices and when the global market is flooded by artificially cheap Chinese products the viability of American and other foreign firms is put into question according to yelen China makes more solar panels batteries and EVS than its domestic Market can absorb it reflects Chinese policies that place great priority on these sectors Channel support to them enable them to continue operating even when prices drop to very low levels due to overc capacity and their firms don't exit um the market instead it's potentially our firms that have to do so one day later China refutes these claims one week later during a visit to China German Chancellor Olaf Schultz pressed his case for open and fair markets warning his hosts against dumping and overproduction this while also urging the European Union to avoid acting out of protectionist self-interest when when byd is starting to sell more cars than BMW that is going to pose problems for China and German relations we are committ at the end of April blinkin again raised the issue solar panels uh electric vehicles and the batteries that power them China alone is producing more than 100% of global demand for these products flooding markets undermining competition putting at risk livelihoods and businesses around the world in early may it was French president macron raising the same issue during President C's visit to France in response president C says overcapacity does not exist before going any further it's important to recall a basic economic principle the principle of comparative advantage which says when country a can make Goods cheaper because of reason like lowcost operations for example that's their advantage and they should sell it to the world country B should find their own comparative advantage in Goods they can make better and then they should trade that's been the key principle guiding global trade for the last 200 years ever since China entered the World Trade Organization in 2001 its share of global exports has been increasing as this data set from the United Nations shows China's share of the global export of goods have been climbing exponentially the last two decades making it the world's Undisputed export Champion around the same time the United States lost more than 5 million manufacturing jobs in part due to the growing trade deficit in manufactured goods with China Japan me Mexico and other countries the US trade deficit with China was the largest Let's uh talk about um the first China shock now the number here is that 5 million us manufacturing jobs were lost and the hollowing out of manufacturing has been linked to all kinds of problems right poverty drug use depression but can you break down these numbers for us how much of it is due to factories Outsourcing to China and how much of this is due to techn iCal factors like automation for example what's really happened is that the China Factor has accelerated a long running trend of decreased manufacturing employment in the us if we go back to the 1950s 30% of the US Workforce was in manufacturing in the early 2000s before China joined the WTO that had already halved to 15% so you can see these long running trends of Technology automation digitization reducing man manufacturing employment and then China joins as well and accelerates this whole process so you get it a much faster uh loss of manufacturing jobs after China joined the WTO in 2001 and that shrinks to around 9% of total us employment about 5 million jobs lost I think what the China shock did is really accelerated a process that maybe would have taken 20 years normally actually took place in around 10 years for some economists refer to that first round of manufacturing job losses as the first China shock when toys textiles glass and all sorts of other straightforward manufacturing processes move moveed to China what us and some European leaders are concerned about is the beginning of a second China shock and this time it's not going to be in Goods like these the second China shock could be even larger than the first and I think what we've got now in China is an unprecedented combination of four things the first is 30% share of global manufacturing the second is relatively cheap wages even now the third and this is key Advanced technological capacity and then the fourth massive consistent sustained State support for these sectors the combination of those four factors is unprecedented in history and with that I think we're going to get a second China trade shock this time at the advanced manufacturing um products and that's going to put a lot of pressure now onto Europe to Japan to South Korea and even again pressure onto the US this is a new shock that is just really beginning and is going to to Ripple through over the next four five 10 years [Music] National interest for [Music] back in 2016 Trump ran an election campaign targeting China and won we can't continue to allow China to rape our country this time around Trump is doing the same let me tell you something to China if you're listening president she those big monster car manufacturing plants that you're building in Mexico right now and you think you're going to get that you're going to not hire Americans and you're going to sell the cars to us now we're going to put a 100% tariff on every single car that comes across the line and you're not going to be able to sell those guyss if I get elected now if I don't get elected it's going to be a blood bath for the whole that's going to be the least of it it's going to be a blood bath for the country that'll be the least of it today after the China issue also features on President Biden's election campaign instead of relying on equipment made overseas in places like China the supply chains will be again made in America they'll begin in America again in America in Europe similar concerns have arisen [Music] [Music] Chinese automaker byd has a lot to celebrate in 2023 it became the world's biggest electric vehicle or EV seller a title it claimed from us company Tesla those results forced Tesla to slash prices of its cars across the globe in first quarter 2024 Tesla emerged tops again but the competition between Tesla and byd continues to be intense [Music] you come to Auto Show and you see all of the traffic at the Chinese automakers booths I was at the Audi booth and one of my favorite beautiful car is the the rron the RS rron and it took me less than 10 seconds to wait for somebody and then I got in it myself then you go over to zeker and they have just launch of Zer X which is a small little car that I think is going to be less than 300,000 R&B or less than $40,000 in the China Market I waited 10 minutes for this little car because there were so many people that wanted to see it and so the management of these European automakers also saw this and then in disbelief they got into the vehicles themselves they closed the door they heard the sound you know that matches what they're traditionally able to do and then look at the technology on the on the in uh on the uh in instrument panel and the infotainment system and um Jaws were dropped I think there is a lot of disbelief a lot of shock uh but a bit of fear you know director level manager level now they touch feel see these cars and they're like wow um we are in trouble [Music] China's EV dreams stretches back to 1992 when prominent China scientist chenu asked the government to start work on EVS if you believe you can achieve the Chinese government played a pivotal role in developing the EV industry when assessing State support in China it's important to note that you could call China a mobilization state so when you have this objective of developing EVS or a made in China 2025 it's not as simple as just one-off subsidies it's a whole effort that the party state gets behind you have cheap lending partly funded by the pboc you have local governments providing land and utility deals uh the trade Ministry puts restri restrictions on on competitor uh products being imported into China and then even the retail investors they see a policy signal and they're going to pile into the into the equities of these companies and provide with cheap financing so it's really a whole system approach to uh developing and supporting these sectors is one that's consistently carried out for a number of years and in the specific case of EVS highlight a couple of policies that were really crucial number one cheap funding uh both for the uh firms themselves but also their prospective buyers the households purchasing these vehicles and the other one was was the tax rebates and the ease of of buying these vehicles particularly in the big cities where license plates are rationed quite scarce it is no secret that government subsidies were crucial to the growth of Chinese EV companies xun for example depended on a state-owned Enterprise near Guang Joo to lend it over 200 million in 2017 for the construction of its initial Factory then the city of Wuhan helped xong buy land and borrow money at low interest rates for a new plant there now xong is not only making EVS but also pushing out cars straight out of science fiction movies this is xun's electric flying car car the vehicle will first be sold in China for more than 1 million y or $140,000 us the company says buyers should be able to fly the EV in designated trial areas in February 2021 China introduced the concept of a low altitude economy into its National planning economists concerned about a second China shock often point to the forces of state plan planning government subsidies and Company Innovation these flying EVS are a case in [Music] point governments elsewhere are pushing back take the electric vehicle sector it is a crucial industry for the clean economy with a huge potential in Europe but Global markets are now flooded with cheaper Chinese electric cars and their price is kept artificially Low by huge State subsidies this is distorting our market so I can announce today that the commission is launching an anti-subsidy investigation into electric vehicles coming from China how you over capacity over capacity the Auto industry in Europe is a major employer and jobs are a major hot button issue when it comes to elections in Europe in February 2023 car maker Ford said it will ax 4,000 jobs in Europe in June 2023 Swedish car parts manufacturer autolive said it will cut 8,000 jobs the same month car maker stellantis announced it plan to close its plant in Austria after 40 years impacting 300 jobs in October Germany's Volkswagen cut 2,000 jobs in the following month French Tire maker Michelin said it will cease operations at three factories in Germany by end of 2025 affecting over 1,500 jobs the Auto industry is a huge part of the European economy its turnover is about seven times Europe's GDP of the European Union that is it employs directly and indirectly about 13 million people that's 6% of total EU employment and also psychologically it's it's a big part of the the history of Industrial Development within Europe so it's a massive part of the economy and they are qu quite rightly worried of of Chinese competition both within Europe and and globally on the 10th of April 24 the European commission put out a 700 page document outlining details of what they say are distortions in the Chinese market do you think that we will see a trade War emerge between Europe and China like what we've seen between China and the US I think trade friction is inevitable that is guaranteed we can see it happening already an outright trade War I think is less likely um mainly for two factors that the first is somewhat ideological Europe is is an open economy it has to trade to survive so it's less willing than the US which is almost self-sufficient in many cases to be isolationist so Europe needs to stay open it needs to trade the second factor is although pressure is coming from China it is still the largest market for many European companies for luxury goods for vehicles for Industrial Products these European companies rely on China for a lot of Revenue a lot of profits uh that are reinvested within Europe so that that dependency is there to a much greater extent than what we saw in in [Music] America for foree across rural China in even the most remote parts of the country solar panels could be seen to dot the landscape in China's cities solar panels are also spread across rooftops and they're even on building [Music] facades China installed a record 27 gaw of solar panels in 2023 that's more than than what the US has ever built in its entire history and more than in any other [Music] country for one of the key reasons why solar production and installation is so high in China is because the economy has been weak now Xi Jinping is trying to shift the economy away from the old growth model relying on property infrastructure high debt towards something a bit more advanced manufacturing new technology uh some more on the export side and so when covid hit and the property crash came over the past couple of years in China instead of pulling the old stimulus levers which were build roads build more houses China really went all out on these Advanced manufacturing sectors so lending and investment by those sectors up around 20% year-over-year for the past couple of years and a lot of that has come from the solar side and so because the economy is weak they're getting more subsidies more pressure to produce and that is driving installation over the last three decades industrial policy State subsidies Innovation intense competition and economies of scale have propelled Chinese solar companies to a level of global competitiveness that few others elsewhere can rival today China dominates the global solar sector in 2021 Chinese companies account for more than 80% of the Global Market at every stage of the manufacturing process according to the International Energy agency in the shadow of their success hundreds of solar companies in the US and Europe declared bankruptcy [Music] we have not forgotten how China's unfair Trade Practices affected our solar industry many young businesses were pushed out by heavily subsidized Chinese competitors pioneering companies had to file for bankruptcies promising talents when searching for Fortune abroad this is why fairness in the global economy is so important because it affects lives and livelihoods hi my name is Joe mourville I'm the president of energy independent Solutions we do a wide mix of anything solar price of Solar I mean when we started the business it was around $3 a off for a module and now you know a decent module you're getting it under 50 cents it's like a you know 1/8 the price or something the US was once a stronghold of solar module manufacturing accounting for around a quarter of global solar module shipments in the early 2000s but that started changing around 2010 we State American made up until maybe 2012 2014 uh when uh we could no longer buy the product anymore because at that point you know China had driven most of the companies into bankruptcy most of the US companies into bankruptcy at that point actually testified in the trade case in Washington for it China basically subsidizes at their production level so their product is coming off of the line before it goes into a container already carrying subsidy us solar manufacturers were going broke but the overall industry was growing fast people found employment selling and installing the China solar modules well couldn't compete head-to-head with China but it kind of improved the whole Market everybody started to really step up to the plate and then it started to the finances started to make sense you know it just started to steamroll from that point helped by Cheap Imports solar installations soared in the 2010s peaking in 2016 16 before Trump got elected and plunging after Trump slapped huge tariffs on China solar Imports no more tariffs on the sun Sol for everyone no more tariffs on the sun Sol for everyone no more tariffs on the China solar modules were slapped with a 30% tariff under Trump's trade War we're out here to fight against the solar tariffs that the Trump Administration has imposed we want make sure that those don't hurt American workers in this growing industry solar is growing we don't want to stop the [Applause] [Music] growth the US and China they need to get politics out of the way and start looking at the good of the human race when President Biden was elected solar installations soared again the US continued to import solar panels but this time mainly from Southeast Asia where many Chinese solar companies set up new factories to avoid the tariffs the US has also been trying to rebuild its solar manufacturing industry factories that were shuttered from Chinese competition are reopening again they are doing so because of generous subsidies from the inflation reduction act which channels 430 billion us to clean energy Industries now the US is also trying to Build It Solar industry using subsidies from the immense inflation reduction act by subsidizing American Industries at this scale isn't the US doing exactly what China is doing yeah um it the us is going back to Industrial policy it's it's a little bit ironic considering they're criticizing China's model of doing things but they are moving back there and doing it themselves the big difference is that they've lost the capacity to do so industrial policy was you know heavily opposed in Washington for years and years and years trying to go back to do that is very difficult they've lost the knowhow or of carrying out big effective industrial policy programs yeah exactly on that point right could there be a risk of over subsidizing an industry that might not be competitive globally and may not be sustainable in the long run yes that I mean that certainly is is a real risk and to do industrial policy effectively it needs to have a clear goal picking the right sector and be sustained and sufficiently large enough over a long period of time to develop that that industrial competitiveness within a a domestic economy now the US can do that the Market's large enough they have the financial resources but the question is also around political willpower will if if a new president comes in will they continue with this industrial policy push globally green capacity is not excessive but in D scarcity the problem now is not over capacity but over anxiety calling for stronger climate response on one hand and erecting green trade barriers on the other would only raise the cost for one's own low carbon transition and also slow down the global development of clean energy we are committed to as blinkin raises the issue of overc capacity in the Solar industry China focuses on new markets for its clean tech exports its aim the global South fast growing populous energy-hungry parts of the world who are trying to transit to clean energy as soon as they can currently there are 745 million people in the world who still do not have access to electricity Europe and Asia were the largest export markets for China solar companies in 2023 with Europe forming 48% of all China solar exports and Asia making up 23% as debates continue around whether or not China's solar industry is facing overc capacity a new trade complaint is lodged this time in wind farms the EU is investigating China's involvement in Wind parks in Spain Greece France Romania and Bulgaria last year the EU imported some $ 1.42 billion US worth in turbines and components from China so the wind power industry is is an interesting one it's an area where the EU is still competitive and where there is quite a lot of advantages in terms of localized production so shipping those big turbine blades it's it's very difficult they are massive now they're getting bigger and bigger transporting them from say China to Europe is very costly very difficult so by the moving early the hope is that the EU will maintain this Competitive Edge it has within wind power production and I think that's the goal of these early stage in investigations electric vehicles solar panels and lithium ion batteries these are the three Industries in which China exports dominate the global market debates have erupted over whether or not China has over capacity in these three areas just how did China come to dominate the global battery industry the answer lies far outside China's borders here in Zimbabwe in Africa Chinese company J changuu Cobalt company broke ground on a new lithium m in July 2023 here at the opening ceremony is the president of Zimbabwe a sign of the importance of this investment Jiang Hau Cobalt company is a market leader in battery manufacturing and has been investing in mines across [Music] Africa over in South South America in the remote Salt Flats of Bolivia Chinese company catl announced in 2023 that it will invest more than a billion dollars here to produce lithium carbonate used in battery [Music] production over in Southeast Asia in Indonesia Chinese companies also dominate the supply chain Indonesia has the world's largest reserve of nickel and Ching Shan Holding Group the world's top nickel producer has been operating here in Indonesia for close to two decades long before nickel became a critical component in the making of batteries according to the iea China processes more than half of the world's lithium along with other crucial battery materials how did Chinese mining companies get such a foothold across different parts of the world [Music] made in Africa with China for the world fore [Music] back in China the battery supply chain is supported with careful State planning this is sweing in Sichuan a city with a population of about 2.8 million people and all the companies on the Main Street of sweing work on just one product lithium batteries here they make the cells the batteries and they even recycle the batteries all of this happened by government design the local government office selects the companies that complements the industrial chain they [Music] [Music] want those battery components made in sweing support the operations of catl the world's largest battery maker catl has a plant in neighboring City iben again a result of industrial [Music] policy the result of these coordinated efforts from mining overseas to carefully plann Supply chains is a battery production process that is unrivaled in the world China's battery makers have achieved unimagined able economies of scale in just over a decade today more than 3/4 of lithium ion batteries are made in China and mainly by just two firms catl and byd the US and Europe have both taken steps in recent years to build up their domestic battery Industries the price tag for self-reliance will not be cheap BNF data suggests that Europe and us would need to spend 98 billion and 82 billion respectively on growing a local battery [Music] industry whether in simple toys home wear party accessories or in high-tech Arena of batteries solar panels and electric vehicles China has managed to achieve comparative advantage in all these industries and more seeing in the context of his long history it is a moment of Reckoning [Music] [Applause] [Music] I think the second China trade shock is just beginning we've had a big change in perception of China trade driven by three major events Co Trump trade War Russia Ukraine so the perceptions have changed but we're only now starting to see the real economic effects in terms of investment decisions trade flows higher inflation routing of the global supply chain that's only just getting started and with that will come much more trade friction in the months ahead so really only the very beginning of the economic impact and the start of a new set of trade disputes [Music] [Music]
