Despite corporations’ new determination to bring supply chains geographically closer to their factories, China is likely to continue to dominate global manufacturing, The Wall Street Journal reported.

China’s share of global factory output edged up from 13 percent in 2019 to 15 percent post-COVID and probably will keep growing, the WSJ said. 

During the same period, Germany’s share slipped from 7.8 percent to 7.3, Japan’s from 3.7 percent to 3.4, and the U.S.’s from 8.6 percent to 7.9.

During the COVID War, subsidies from Western governments to businesses and households set off a buying spree that flooded China’s factories with orders. The country’s manufacturing sector grew and strengthened as a result.

Inflation has sent even more dollars to China as U.S. consumers continued to spend while prices rose.

The U.S. trade deficit with China grew by 21 percent during the first six months of this year, compared to the same period in 2021, U.S. census bureau data shows.

As a result, China dominates, plays a significant role in, or has targeted key growth areas such as chips, smartphones, solar energy, and electric cars.

China’s exports of solar panels rose 113 percent to $25.9 billion during the first half of 2022 over the same time last year. In July, electric cars led China’s vehicle makers’ exports of 290,000 autos, a record.

At the same time, over the past several years China has been steadily expanding its market share in the global industrial sector, supplying more of the world’s engines, heavy machinery, and other capital goods, long an area of Germany’s strength.

TREND FORECAST: Europe is mired in an energy crisis and parts of the continent already are rationing energy, including to factories. In the U.S., a shortage of workers is hobbling expansion of the manufacturing sector.

Despite having a growing assortment of troubles, China will remain the world’s manufacturing hub for the foreseeable future.


China’s export economy expanded by 7.1 percent in August, year over year, barely half of the almost 13 percent analysts had expected.

Global demand is slumping under the combined weight of inflation and high energy prices. 

Beijing’s own zero-tolerance anti-COVID policy also shared blame for the lackluster outcome, analysts told the Financial Times, as several manufacturing centers such as the city of Yiwu were paralyzed.

On 6 September, 49 metro areas across the country were either shut down or under some degree of limitation, affecting 20 percent of the population and 25 percent of its economic activity, Nomura analysts estimated.

In addition, China has been dogged by persistent droughts and heat waves that have forced utility providers to periodically cut electricity supplies to factories.

Shipments to Europe grew 11.1 percent last month, compared to 23 percent in July; exports to the U.S. in August shrank 3.8 percent year on year after adding 11 percent the month before.

August’s imports, predicted to see a 1.1-percent yearly growth eked out only a 0.3-percent rise to $235.5 billion, hurting companies abroad that depend on China to be a robust buyer of their goods.

The import tally has not been that feeble since April, when Beijing slammed shut at least 45 cities, locking down more than 320 million people.

The country’s trade surplus had set a monthly record in July, growing at a yearly pace of 18 percent to $101.3 billion. 

Forecasters had predicted a $92.7-billion overage in August.

However, the surplus came in at only $79.4 billion, the slimmest since February.

Nomura has become the latest bank to downgrade its view of China’s GDP growth this year, trimming its prediction from a 2.8-percent expansion to 2.7 percent.

TREND FORECAST: As we had long noted, for China to extend its economic growth, it must become more of a self-sufficient economy, relying more on Made-in-China products bought by their population than relying on increasing revenue through exports. They were on-trend to making this happen before they launched their zero-COVID policy.  

Indeed, The Trends Journal has reported extensively on China’s strict COVID guidelines that snuffed out its economic growth and self-reliance.  (See “GLOBAL ECONOMY IMPACTED BY CHINA’S SLOWDOWN DUE TO ‘ZERO-COVID’ POLICY,” “HERE WE GO AGAIN: CHINA RAMPS UP COVID WAR AS KEY CITIES SHUT DOWN” and “CHINA RAMPS UP ZERO-COVID POLICY: STAY HOME, DON’T TRAVEL.”

However, the COVID War will come to an end and China will resume its self-sufficiency goals. 


China’s four largest banks have seen overdue real estate loans skyrocket by 50 percent over the past 12 months as the country’s property crisis begins taking a toll on the financial sector.

Bad property loans at the Agricultural Bank of China are up 152 percent; and 97 percent at Construction Bank of China.

The value of the late loans reached $20 billion by 1 July, compared to $13 billion a year earlier.

In China, home buyers commonly take out mortgages on homes before their construction is complete.

As overleveraged developers became unable to continue construction, a movement emerged in which mortgage holders refused to make payments for homes they were unable to occupy.

That left banks stranded in the middle.

Also, banks are coping with a weaker lending market overall as the tech and financial sectors are crimped by tighter regulations and a global slowdown has softened the country’s export economy. (See “Virus, Global Slowdown Dent China’s Export Economy” in this issue.)

“We see multi-year structural decline” in return on equity “as banks retreat from the property sector amid stalled projects, mortgage boycotts, and heightened regulations,” Dexter Hsu, analyst at Macquarie, wrote in a note to clients.

Although loans to developers account for no more than 9 percent of loans by China’s biggest banks, they will become “the major source” of the banks’ failing loans over the next two years, Hsu wrote.

That will force the banks to raise interest rates to cover the losses, he added.

“The real exposure to developers could be much bigger than reported because [banks] extended credit to developers via proprietary investments and off-balance-sheet credits like wealth management products, trust products, private funds, and private bonds,” Hsu pointed out.

China’s government has pressured state-owned banks to offer below-market interest rates to support businesses and homebuyers, which would force the banks to accept lower earnings.

The banks have “no incentive” to make more property loans, an executive with one of the “Big Four” banks said to the Financial Times.

“Our cost of capital is still too high,” he added. “The more loans we issue, the more non-performing loans we will have.”

TREND FORECAST: China’s government waited far too long to rein in reckless borrowing by property developers, allowing the freewheeling property industry to grow to as much as a third of the country’s GDP while danger signals mounted.

The first sign of trouble was a big one: Evergrande, China’s premiere developer with 200,000 employees and 1,300 residential developments across the nation, signaled a year ago that it might default on $300 billion in bonded debt, as we reported in “China’s Real Estate Market Teeters on Evergrande’s Debt” (21 Sep 2021).

In December, Evergrande did default on a portion of its debt, as did Kaisa Group Holdings, another major developer. (See “Evergrande in Default, Fitch Says,” 14 Dec 2021).

Beijing has taken steps to insulate the larger economy from China’s real estate mess but the damage is already leaking beyond the property sector.

The debacle—coming at a time of a global economic slowdown, droughts and heatwaves, and rolling anti-COVID lockdowns across the country—will continue to drag on China’s economy at least through 2024.

Comments are closed.

Skip to content