World leaders are faced with a strategic choice that will define global prosperity and our national security for a generation. As China faces an economic slowdown at home, Beijing is doubling down on its drive to be the world's manufacturing superpower and is exporting the resulting overcapacity at artificially low prices. Surges of cheap Chinese exports are poised to devastate market-constrained producers in the United States and around the world.
China's leaders are betting that world leaders will fail to mount a unified response and hoping that they can run the same playbook that has worked for them in the past. We are at a pivotal moment in which China depends on the rest of the world capitulating to its predatory practices to avoid making long-overdue reforms. But once this surge of cheap Chinese products makes its way to our markets, it has the potential to destroy production capacity here in the United States and around the world, and thereby make all of us more dependent on China for our daily needs for a generation to come.
If we don't take decisive action, we risk repeating the "China Shock" that reverberated across the United States after China joined the World Trade Organization. This shock had a devastating impact on the U.S. industrial base, leading to hollowing out U.S. manufacturing facilities across the country and the communities that supported them in every state. According to some estimates, imbalances in our trade relationship with China has led to the loss of more than 3.7 million American jobs, with three-quarters of those jobs in manufacturing. In my home state of Illinois, more than 160,000 jobs were lost, with my district losing more than 15,000 jobs, making it one of the most heavily impacted districts in one of the most heavily impacted states in the country. We cannot let this happen again on our watch.
Beijing believes that the United States made a "strategic mistake" in allowing the U.S. industrial base to relocate overseas in search of free trade and open markets. Beijing wants to avoid making this same mistake and has made clear that China must remain the dominant manufacturing power to be a global superpower. As a result, Beijing is actively preventing manufacturing capacity from shifting to lower labor-cost trading partners as it otherwise would naturally. Beijing has sought to stabilize the manufacturing sector's share of GDP since the 14th Five-Year Plan, with several key local governments announcing quantitative targets for their share of manufacturing in the economy. Today, China already produces one-third of the world's manufactured goods, which is greater than what is produced by the United States, Germany, Japan, and South Korea.
Faced with an economic slowdown, Beijing is returning to a predictable tactic—betting that strong exports of manufactured goods together with heavy investment in production capacity will stimulate growth. China has a long history of structural overcapacity, but these imbalances have now reached unprecedented levels. It's fitting that Beijing's push for manufacturing-led growth has been described by economists as a "sugar high" because it is neither healthy nor sustainable.
Investment has been redirected away from the property sector and state banks have instead been encouraged to provide credit to priority industries. According to China's central bank, new lending for industry skyrocketed to $670 billion last year, up from $83 billion only four years earlier. Sectors prioritized by the central government through programs such as Made in China 2025 are flooded with investments backed by local governments. But since 2020, there has also been growth across all manufacturing sectors, including steel, household appliances, fertilizers, and machine tools, among others.
Chinese companies, across a wide range of sectors, now produce far more than domestic consumption can absorb, and China's manufacturing trajectories are well above plausible estimates of global demand. By the end of this year, the global supply of solar panels is expected to exceed global demand by nearly three-fold, while China continues to expand investment in solar despite overcapacity and sharply declining prices. Similarly, in electric vehicle batteries and battery components, China is expected to produce more than four times its domestic demand.
Beijing is assuming that it will be able to flood markets well beyond what global demand can absorb, which will undercut G7 efforts to de-risk and build resilient supply chains and erode our productive capacity, and thereby increase the potential for economic coercion. Beijing has shown that it has both the capability and intent to weaponize trade dependencies for geopolitical advantage, as it now dominates critical choke points in global supply chains. If Beijing can cut off supplies of products necessary for daily life in the United States and our allies, how credible will our deterrence posture be?
At this critical moment, world leaders can change our collective economic trajectory while Beijing still depends on the rest of the world to accommodate its plan to export its way out of a domestic economic crisis of its own making. President Joe Biden has vowed that we will not repeat another China Shock here in the United States. Other countries, including many in the developing world, are already starting to take responsive actions, including Turkey, Brazil, Thailand, South Africa, Mexico, and Indonesia. Here in the United States, we are examining how we modernize our toolkit to take more nimble and decisive action. Our message to friends in capitals around the world is: It is time we come together and collectively mount a response to the unique threat that China poses to the global economic order. This is both an economic and national security imperative. We must stand up and tell China in a clear and unified voice: No more.
Raja Krishnamoorthi serves as ranking member of the House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party and represents Illinois' 8th Congressional District.
The views expressed in this article are the writer's own.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
