![Emerging countries also fear the influx of Chinese products Emerging countries also fear the influx of Chinese products](https://media.lesechos.com/api/v1/images/view/6643753aa90f251312236bad/1280x720/01101063101441-web-tete.jpg)
Westerners are not the only ones to worry about Chinese predominance in certain industrial sectors. The “global south” also fears the flood of products manufactured in the Middle Kingdom. This is the case in many countries regarding steel. Chinese overcapacity in the steel industry is very significant due to the real estate crisis which has caused the construction sector to decline. Chinese steel, which no longer finds buyers on the domestic market, automatically finds itself on foreign markets. Which makes Beijing’s trading partners cringe, most often emerging countries which see their own producers crushed. “We are witnessing the emergence of trade tensions and the development of protectionism between southern countries,” explains Julien Marcilly, chief economist of Global Sovereign Advisory.
Increases in customs duties
Last month, the Brazilian government announced that it wanted to double customs duties on certain steel imports to 25% to defend its steel industry. Producers in all countries will be affected by this increase, but the aim is to curb Chinese imports which have surged in Brazil over the last two years. In 2023 alone, they will have jumped by 60% according to the Brazilian Steel Institute. Mexico also raised its customs duties to 80% on Chinese steel. India had done the same a few months earlier, as has Vietnam since 2020. Thailand has launched an investigation and is considering doing the same.
A major producer of raw materials, Indonesia has implemented a ban on the export of raw nickel, which the Chinese industry is particularly fond of due to its importance for the energy transition. The goal is to push Chinese companies to invest locally to process nickel.
There is a whole range of regulations of this type in emerging countries in different sectors. In electric vehicles, for example, India accepts that cars are imported for five years into its territory if and only if the manufacturer in question invests at least 500 million dollars in factories on its soil. The message is clear: India, a country with 1.4 billion inhabitants, intends to develop its own green technology industry and will not allow its market to be taken away by Chinese manufacturers.
The “global south” is fracturing
“Poorer countries, such as Nigeria, are accepting the influx of cheap Chinese manufactured goods. This is not the case for middle-income countries like Brazil or Indonesia. They are starting to have a problem with Chinese industry because they want to develop their own industrial production capacities to move upmarket,” explains George Magnus, former chief economist at UBS and now a researcher at the China Center of the University of Oxford. Because, as Sébastien Jean, professor at the National Conservatory of Arts and Crafts (CNAM), says, “the manufacturing sector is central to the economic development of countries. Brazil is an interesting case because it is a country that has benefited and still benefits a lot from Chinese economic growth. By taxing steel imports, Brasilia is showing that it does not want to remain eternally relegated to the rank of supplier of raw materials.”
Are trade tensions between China and southern countries set to increase? “Yes,” replies Julien Marcilly, “especially since China depends more and more on foreign imports, whether Brazilian soya or Indonesian nickel.” “Given the weight of Chinese industry, its internal market which allows it to benefit from gigantic economies of scale and the desire of countries to protect their own industry,” the so-called “global south” is in fracturing,” concludes Brad Setser, American economist at the Council on Foreign Relations.