Some stiff headwindsChina is raising its trade barriers. It has become a blatant defender of its local industries after gaining confidence in its technological standards.
It’s raising tariffs on imports that could undermine the competitiveness of local companies. Beijing last week announced a new guideline on battery supplies for electric vehicles eligible for government subsidies, which are essential to sell EVs at an affordable price. It required batteries to have an output capacity of 8 gigawatt-hours for licenses to be issued as early as January. LG Chem and Samsung SDI sell batteries from China with an output capacity of only 3 gigawatts. They hardly have time to comply over the next month or so. Without subsidies, local manufacturers cannot compete in the world’s largest EV market. Their sales will shrivel and their losses will translate into gains for Chinese competitors.
China has taken more obvious protectionist actions by attempting to raise import tariffs. Its Ministry of Commerce last week announced that it was starting a fresh review of dumping charges on Korean polysilicon imports. It is reinvestigating those imports because they have remained strong even under antidumping tariffs of 2.4 percent to 48.7 percent imposed since 2014 at the request of Chinese competitors. Korea’s OCI and Hanwha Chemical could be hit hard by the higher levies. These actions follow a ban on the airing of Korean TV programs and shopping restrictions in Korea by Chinese tourists after Seoul’s decision to deploy the U.S. antimissile system dubbed the Terminal High Altitude Area Defense.
The greater reason for these actions is economical. Beijing now believes that China Inc. has achieved competitive technology levels in key industries. Chinese brand names have become stronger in automobiles, smartphones and televisions. Together with the signs of protectionism in the United States, Korea faces some mighty headwinds in the two largest markets for trade in the world. U.S. president-elect Donald J. Trump is offering generous tax incentives to Apple if it brings back manufacturing jobs to the U.S. Seoul must normalize its leadership and politics as soon as possible so that it can work out these economic risks and the grave challenges ahead.
JoongAng Ilbo, Nov. 26, Page 30