Cheaply made and doomed to fail... 'China Dumping' shaking the global market [News Terms]

All-Out Ultra-Low-Price Offensive from China
Steel, Electric Vehicle, and E-Commerce Markets in Crisis
Formation of Anti-Dumping Tariff Sentiment Against China

‘China Dumping’ refers to the export strategy where Chinese companies sell overproduced products in overseas markets at rock-bottom prices. 'Dumping' means selling goods at low prices regardless of profit or loss. In international trade, it refers to the strategy of exporting goods to foreign countries at prices lower than domestic prices. The ultra-low-price offensive from China, at the level of clearing out inventory, is identified as the cause of the ‘China Shock’ that distorts the order of the global economy, including South Korea.

China Dumping appears comprehensively across various industries. It is also evident in the iron ore market. According to the Ministry of Trade, Industry and Energy’s raw material price information, the spot price of iron ore was $92.60 per ton as of the 19th, down 31.48% from January ($135.15). This is below the industry’s typical production breakeven point of $100 per ton.

Not related to specific expressions in the article [Photo source=Asia Economy DB]

The decline in iron ore prices is largely influenced by China. Steel industry information provider Kallanish Commodities reported that steel demand in China has decreased by more than 10% since 2020. This is due to prolonged real estate market downturns and sluggish domestic demand, which have reduced steel consumption by Chinese construction and manufacturing companies. On the other hand, China’s steel production soared to 1.05 billion tons annually during the same period and currently maintains over 1 billion tons per year. China is the largest steel producer, accounting for more than 50% of global steel production. Due to the Chinese government-led overproduction policy and low-price sales, governments worldwide are struggling with the ‘China-origin steel tsunami.’

C-commerce (Chinese e-commerce) is no different. In 2018, AliExpress entered the market, followed by Temu in July last year, and Shein officially announced its entry into Korea last June. The ‘Al-Temu-Shein’ led China Dumping is shaking the Korean e-commerce market. The ultra-low-price product offensive has neutralized domestic open markets. There is also analysis that this is not unrelated to the collapse of Tmon and Wemakeprice due to excessive discount coupon issuance. The domestic distribution industry generally estimates that C-commerce absorbed consumers who were looking for cheap products in domestic open markets.

Not related to specific expressions in the article [Photo source=Asia Economy DB] [Image source=Reuters Yonhap News]

The ultra-low-price product offensive is immediately beneficial to consumers. Due to high inflation reducing real income, consumers can purchase the same or similar products cheaper than domestic open markets. However, from a long-term perspective, there is a risk of the domestic industry itself collapsing. According to the domestic petrochemical industry, LG Chem suspended operations at two SM plants in Daesan, Chungnam, and Yeosu, Jeonnam, last year due to the dumping offensive of Chinese styrene monomer (SM). SM is an essential petrochemical raw material used in manufacturing automobiles and home appliances. The Ministry of Trade, Industry and Energy conducted a dumping investigation in April against four Chinese SM import and manufacturing companies.

The trend of strengthening tariffs against China’s ultra-low-price offensive is spreading worldwide. The United States announced that from the 27th, it will raise tariffs on Chinese electric vehicles, solar cells, steel, aluminum, electric vehicle batteries, and key minerals. Tariffs on Chinese electric vehicles will increase from the existing 25% to 100%, and tariffs on Chinese steel and aluminum products will be raised more than threefold from the current 7.5% to 25%. Latin American countries such as Brazil, Chile, and Colombia are also raising or considering raising tariffs on Chinese steel products. The European Union (EU) is considering expanding tariffs on Chinese electric vehicles from the existing 10% to up to 46.3% as of last August.