(19 February 2025 – China) President Trump’s global tariff war is set to deepen critical overcapacity issues confronting China as the growing volume of cheap goods inundates companies struggling to connect them with willing buyers as prices rise.
From solar panels to steel, more Chinese manufacturers face challenges after slashing prices to compete for market share. Almost 1 in 4 of China’s publicly traded companies were loss-making in Q3 2024 compared with 1 in 5 in 2023 and less than 1 in 10 in 2019 pre-pandemic according to Nikkei Asia.
Trump’s extra blanket tariffs of ten percent or greater on over US$400 billion worth of Chinese exports risk pushing more manufacturers into insolvency or accelerating the “China Plus One” relocation of production out of China.
As of 2023, the proportion of “zombie” listed companies, those that generated revenue below interest costs for two years, hit a decade high of 10.4 percent according to a Gavekal Research estimate.
“There are other costs to the manufacturing-first policy Job growth is stunted, the demand side of the economy is repressed and firms are ever more dependent on exports to stay afloat” commented Gavekal Dragonomics China Strategist, Thomas Gatley.
“Relocating products to third countries can shield Chinese manufacturers from the shock of tariffs, but it’s not so positive for the Chinese economy since they are taking away job opportunities” stated University of Hong Kong Finance Professor, Chen Zhiwu.