The Chinese Economy: Stalling—and in Export Overdrive

Author

Special Advisor and Resident Senior Fellow - U.S. and Asia

François Godement is Institut Montaigne’s Special Advisor and Resident Senior Fellow – Asia and America. He was also a Nonresident Senior Fellow of the Carnegie Endowment for International Peace in Washington, D.C. and, until the summer of 2024, an external consultant for the Policy Planning Staff of the French Ministry for Europe and Foreign Affairs. He was the Director of ECFR’s Asia & China Program and a Senior Policy Fellow before leaving in December 2018.

Much as the G7 countries might wish it were otherwise, "rebalancing the economy" is still not on the agenda for the People’s Republic of China. In order to assist European decision makers in shaping policy toward China, this policy brief seeks to analyze the key drivers shaping the country’s economic trajectory. China’s economic outlook is defined by two core dynamics: surging exports and a slow domestic economy. In the context of surging exports, a shift toward a balanced economy is unlikely any time soon, and with a slow domestic economy, there is little hope of reforming the economic system. This policy brief unpacks the forces underlying China’s current heightened competitiveness: subsidies, currency undervaluation, and overproduction. As Chinese exports to Europe continue to surge, Brussels must navigate complex trade-offs to safeguard the European economy and decide whether to respond to this challenge in a targeted and systemic fashion or by taking a WTO-compliant neutral approach. It will also be necessary to conduct a currency realignment—but without alienating Europe’s other partners in Asia in the process.

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Headlines

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