BLOG: A murky future for China’s exports: Implications for chemicals

John Richardson

22-Aug-2024

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

Whereas it might be reasonably straightforward to assess the future of China’s direct chemicals exports (today I look at polyester fibres and polypropylene as examples of the kind trade tension Heat Maps you need to create), the outlook for China’s exports of manufactured goods is murkier.

See today’s blog post for a full explanation, and the see the summary below:

  • In practical terms, because China completely dominates some manufacturing chains, there may be no alternatives to China. It could be in the best interests of the West to do “win, win” deals with China. Take electric vehicles as an example. If you assume that EVs are going to dominate the EU market, and that the EU auto industry cannot catch up with China, why not invite China in to build EV factories in the EU, thereby protecting local jobs? This is what the Americans did with the Japanese auto industry back in the 1980s.
  • Or industrial policy could work in the opposite direction as the China split with the West widens. A good example is the US Inflation Reduction Act. This might over the long-term even apply to value chains where China dominates including EVs. The split could widen to the point where we are much less dependent on China for everything from our smartphone components to our polyester shirts.
  • Or in practical terms, will, as I said, deals be done and the world muddles through via Chinese car factories in Europe and exports from third-party countries like Turkey, Vietnam and Mexico? (Chinese components go to these countries, are assembled and move onto the West, thereby getting around the “sound and fury” signifying not a great deal of antidumping duties. This to some extent is already happening).Now that the Chemicals Supercycle is over, much more in-depth scenario planning is essential.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.

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