Foreign orders have “evaporated” for many Chinese exporters, borrowing the word from one in southern China.
He is not alone. On social media platforms in China, they discuss their dilemma. A few said they were immune from the impact of U.S. tariffs owing to their irreplaceable products.
These exporters reported that U.S. orders formed most of their business—and were the most lucrative. Without the American market, no other region, including Europe, can fill the void.
Ocean container bookings from China to the United States have dropped by 60 percent since universal tariffs were announced on April 2, according to Ryan Petersen, CEO of Flexport, an international shipping company.
Exports drove one-third of China’s economic growth last year, the highest level since 2017.
China’s economy is growing more slowly; that’s the official story. Some experts dispute these figures—they say the Chinese economy is already in recession, and U.S. tariffs may make things a lot worse.
“China’s in a real problem period,” Rod Martin, founder and CEO of Martin Capital, told The Epoch Times.
Beijing will have trouble backing down from its standoff with the United States, he said, because Chinese Communist Party leader Xi Jinping “has clearly created his whole persona around being the leader who can stand up to America.”
Given the irreplaceable nature of the U.S. consumer market in China’s export-driven economy, Martin said, Beijing will “have to make a deal at some point, or this recession does turn into a depression.”
William Lee, chief economist at the Milken Institute, an economic think tank based in California, said Xi will likely subsidize Chinese exporters at the cost of further increasing deficits of heavily indebted local governments.
The Chinese regime can probably keep exporters afloat for about six months to a year if it doesn’t resolve the trade war with the United States, Lee projected.
A recession is defined as a decline in GDP in two consecutive quarters. A depression is a prolonged recession.
Two key forward-looking indicators point to a downward trend.
In April, China’s factory activity contracted the fastest—a 3 percent month-over-month drop—in two years, according to the country’s National Bureau of Statistics. The manufacturing purchasing managers’ index (PMI) was 49 in April, the lowest since December 2023.
China’s official youth unemployment rate was at 16.5 percent in March. Frank Xie, business professor at the University of South Carolina Aiken, said the situation will worsen when a new wave of college graduates enters the job market this summer.
More than 12 million college students will graduate in June. Among them, about 7 million will enter the job market, and the remainder will pursue advanced studies.
The regime paused reporting the number in June 2023, when it hit a record of 21.3 percent. The Epoch Times reported at the time that the actual youth unemployment rate may have been much higher. A college law professor estimated it at as high as 80 percent.
The regime resumed reporting unemployment figures in January 2024, but began excluding students from its methodology.
“China’s economic structure was built based on globalization,” Yeh Yao-Yuan, professor of international studies at the University of St. Thomas in Houston, told The Epoch Times.
“However, after China’s overcapacity distorted the global markets for so long, and the global markets began to say ‘no,’ the domestic market won’t be able to absorb the overproduction. It’s only a matter of time before the Chinese economy enters a depression.”
So, if the official data from the Chinese regime will never confirm anything but growth, let alone a recession or depression, what signs can observers watch for to know whether it has entered a worse phase?
Among all statistics, export data is difficult to forge because one country’s exports would need to equal other countries’ imports, Xie said.
Social unrest due to the lack of jobs will be another sign of China entering a depression, according to Yeh.
China’s Commerce Ministry, in a subtle shift of tone on May 2, indicated that it was open to trade talks.
Now, for many Chinese exporters, competing internally seems to be the only viable way to move piled inventories and keep producing.
A shoe wholesaler in Guangdong Province keeps posting advertising videos showing the difficulties of keeping 1,000 jobs alive and the high quality of its products because they are tailored for exports. The sales manager said the shoes are made for well-known Western brands, “they are just without the logos.”
— Terri Wu
BOOKMARKS
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