Poisoned by Cheap Imports: The Dark Side of ‘China Dumping’ That’s Rattling Global Markets
China’s Ultra-Low Price Offensive: A Global Market Phenomenon
China’s export strategy, known as “China Dumping,” has been making waves in the global market. This strategy involves selling overproduced products at low prices, often below the domestic market price, to foreign markets. The term “dumping” refers to the practice of selling a product at a low price, disregarding the benefits and losses. In international trade, it refers to the strategy of exporting goods to foreign countries at a lower price than the domestic price.
China’s dumping strategy has been identified as a major contributor to the “China Shock,” which has distorted the global economy, including Korea. The effects of China’s dumping can be seen in various industries, including the iron ore market. According to data from the Ministry of Trade, Industry and Energy, the spot price of iron ore has dropped by 31.48% since January, from $135.15 to $92.60 per tonne. This is below the industry’s typical production breakeven point of $100 per tonne.
The decline in iron ore prices is mainly due to China’s decreased demand for steel. According to Kalanish Commodity, a steel information company, China’s steel demand has fallen by more than 10% since 2020. This is attributed to the prolonged real estate recession and sluggish domestic demand in China. On the other hand, China’s steel production has increased to 1.05 billion tons per year, accounting for more than 50% of global steel production. The Chinese government’s overproduction policy and low-price sales have led to a “Chinese steel tsunami” that is affecting governments worldwide.
China’s e-commerce market, also known as C-commerce, has also been making waves in the global market. Following AliExpress in 2018 and Temu in July last year, Shein officially announced its entry into Korea in June. The influx of very low-priced products has neutralized the domestic open market, with many consumers opting for cheaper alternatives. The domestic distribution industry estimates that C-commerce has absorbed consumers looking for cheap products in open domestic markets.
While China’s ultra-low price offensive may benefit consumers in the short term, it poses a risk to the domestic industry in the long term. According to the domestic petrochemical industry, LG Chem suspended operations at two SM plants in Daesan and Yeosu due to the dumping of Chinese styrene monomer (SM). The Ministry of Trade, Industry and Energy conducted a dumping investigation against four Chinese SM importers and manufacturers last April.
In response to China’s ultra-low price offensive, many countries are strengthening tariffs on Chinese products. The United States has announced plans to increase tariffs on Chinese electric vehicles, solar cells, steel, aluminum, electric vehicle batteries, and major minerals. Tariffs on Chinese electric vehicles will increase from 25% to 100%, while tariffs on Chinese steel and aluminum products will more than triple from 7.5% to 25%. Latin American countries such as Brazil, Chile, and Colombia are also raising or considering tariffs on Chinese steel products. The European Union is considering expanding tariffs on Chinese electric vehicles from 10% to up to 46.3% in August.