The World Comes Out Against China

Commentary

Finance ministers and central bankers of the G20 recently showed remarkable unity in resisting China’s economic policies and ambitions.

It has become clear to all these nations for some time that Beijing aims to make other nations increasingly dependent on Chinese production. Meeting in Asheville, North Carolina, earlier this month, these nations there said “no” to this plan, and in no uncertain terms, too, though little was said beyond that.

The communique emerging from the meeting was more pointed than these things usually are. It stated that “countries with excessive and persistent external surpluses” should end policies “that result in an overreliance on exports for growth.” It went on to insist that such countries “eliminate non-market policies” and “remove distortions that constrain domestic consumption.”

Though diplomatic niceties prevented the document from naming China, it was clearly the target of such stern language. To underscore that obvious point, China was the only attendee to dissent. Even Russia signed.

Both at the meeting and elsewhere, the signatories have made clear their concerns about the flood of Chinese exports encompassing the globe. Washington has long maintained that Chinese exports have undermined America’s industrial base and has accordingly imposed a tariff wall against Chinese-made goods.

More recently, the French government has agreed with the American analysis. It published a report in February noting how the growth of Chinese exports threatens “the very core of Europe’s production system.” If that were not definite enough, the report’s title was: “The Chinese Steamroller.”

German Chancellor Friedrich Merz has noted with dismay how Germany’s bilateral trade deficit with China has grown nearly fourfold since 2020.

Japanese Finance Minister Satsuki Katayama summarized the general sense, saying that when it comes to China, “everyone’s feelings have crossed a threshold.”

For all the unity of feeling, however, no one seems ready yet for concerted action. Except for Washington and the European Union’s recent imposition of tariffs on Chinese electric vehicles (EVs), some equipment, and a flat fee on small parcels, few seem ready to take such bold action.

Instead, these nations have focused on China’s management of its yuan, claiming that the currency’s extreme undervaluation has given Chinese products a competitive edge by making them cheap on world markets.

Goldman Sachs estimates that the yuan is undervalued by 19 percent. That implies quite a pricing edge. The Council on Foreign Relations puts the undervaluation at 35 percent, an even bigger edge. The German chancellor has claimed that the yuan is undervalued by 25 to 30 percent.

This focus on currency has led some world leaders, most notably Merz, to call at June’s G7 meetings of the world’s most advanced nations—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—for an update of the Plaza Accord. This refers to the agreement reached in 1985 at the Plaza Hotel in New York to force the value of Japan’s yen upward, thereby reducing the huge trade surplus that the country had with the rest of the world at the time.

It is not clear that Beijing would comply as Tokyo did some 40 years ago. Nor is it clear that even a sharp upward revaluation of the yuan would be sufficient to address the complaints voiced by the G20 nations.

One problem is that China’s yuan does not trade freely on currency markets. Instead, the People’s Bank of China (PBOC) manages the currency within daily trading bands. To be sure, the yuan has appreciated recently, rising some 6 percent against the U.S. dollar over the past 12 months, but that is hardly in the range referenced by Merz and others.

To go further, the PBOC and Beijing would have to be on board, which is highly unlikely. Under such circumstances, China would need to replace its reliance on exports as a growth engine with a more dynamic domestic economy, and, so far, Beijing has made no headway in this direction. Doubtless, Beijing also sees a warning in how shortly after the Plaza Accord, Japan’s economy began to stagnate.

For all the doubts about next steps, the outcome of the G20 meeting should put Beijing on notice. Its clear ambition to make the world dependent on Chinese industry has lost its future, if it ever had any.

The rest of the world—not just the Trump administration in Washington—will not tolerate that outcome. Beijing should look forward to more steps to limit its exports and adjust its economic model accordingly. It is an open question whether Beijing can do that.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.