In a recent note from the U.S. Federal Reserve the China Shock 2.0 is discussed. This is the period from 2018 to today when China’s global trade has re-surged and differs markedly from the China Shock 1.0, the post WTO-accession period from 2000 to 2007.
The China Shock 2.0 has been characterized by a rise in exports of goods from capital and technology intensive sectors and is supported by highly developed domestic supply chains.
This not only reflects a stronger China but as China now accounts for 18% of the global economy an ever-closer union of the world economy.
In recent years the only place in the world China hasn’t increased it’s import penetration to is the United States; which may explain why observers there seem not to have taken full cognizance of this progress?
The paper avoids drama in its conclusion, that China is manifestly continuing to change the pattern of trade for the world.
My two-pennyworth would be to note the China Shock 2.0 began at almost exactly the same time as the first Trump tariffs; and the U.S., having manifested itself as an unreliable trade partner has forced China to develop new markets, upgrade their export manufacturing capability and more deeply embed themselves into the non-U.S global economy.
All that works for China Inc., less so perhaps for Uncle Sam.
You can read the note in full via this link China Shock 2.0.
Happy Sunday.