Specifically, they double the demand for these two products of the entire planet. This means that their production is not subject to or conditioned by the market, but by their economic policy. The situation stems from a structural imbalance that has been growing over the years.
The Asian country dedicates 40% of its GDP to private consumption, compared to 50% in Europe and 68% in the United States. In contrast, it allocates 42% of its GDP to investment, double that of Europeans and North Americans. As expertly explained by researcher Judith Arnal from the Real Instituto Elcano at the KPMG Corporate Governance and Board Forum, "an economy that invests more than it consumes produces more than it absorbs, and the surplus goes out as a surplus. It is not a debatable point, it is an accounting identity." China's famous industrial overcapacity is expanding as the quarters go by.
Spending on real estate assets is plummeting due to its enormous bubble, so all investment power is focused on manufacturing. Two new elements are added to this. It is no longer about low-value-added products, but about the most advanced technology. Furthermore, the closure of the U.S. market concentrates exports in the EU, leaving the European sector completely unprotected. The OECD estimates that large industries in China receive nine times more public support than their counterparts in the rest of the world. But this data needs to be broken down by sectors.
The European Union has provided some figures on electric vehicles. BYD cars are subsidized at 17%; Geely (owners of Volvo) at 18%, and SAIC at a whopping 35.5%. This last state-owned company is finalizing the installation of an assembly plant in El Ferrol, a few kilometers from Vigo, where Stellantis (Citroën) is located. Is this competition or substitution? Spanish authorities argue that SAIC will produce with European components without protesting because it is forbidden to share technological knowledge with the receiving country.
The accounting identity in China that Arnal talks about is not part of a balance constrained by comparable financial rules, but by a geo-economic perspective of domination. And so, with its pros and cons, it is how it should be approached.