The ripple effect of cheap Chinese goods: unveiling the global plastic waste crisis
A wave of inexpensive Chinese products flooding the developing world is reportedly stirring tensions towards China and countries beyond Europe and the U.S. As Beijing seeks to forge alliances amid escalating trade disputes with the U.S., it asks developing nations to absorb its excess manufacturing output.
China may be panicking ahead of potential tariff increases proposed by Donald Trump and amid resistance from the countries that are adversely impacted by Chinese dumping. Already, many nations report a tidal wave of cheap Chinese junk undermines local industries, jeopardizes jobs, and hampers the growth of domestic manufacturing – a vital pathway for developing countries to ascend the development ladder.
For many developing nations, the influx of low-cost Chinese goods threatens to replicate the “China Shock” that disrupted U.S. industries over the past few decades. Between 1999 and 2011, over two million American jobs were lost as domestic manufacturers struggled against the Chinese imports in sectors like furniture, toys, and apparel.
The surge of Chinese exports to emerging economies
Amid overproduction and increasing Western tariffs, Chinese exports to emerging markets have escalated significantly. Since early 2022, the value of these exports has risen by a reported 19 per cent, outpacing the 11 per cent increase in imports from these countries. This imbalance has led China’s trade surplus with emerging economies to swell to US$384 billion – a 56 per cent increase from 2021 and indicative of China’s strategy.
In Thailand, for instance, over 1,700 factories shut down from the beginning of 2023 through the first quarter of 2024 due to the surge of Chinese imports. While new factories are opening, the outlook remains challenging as local industries grapple with intensified competition.
Developing nations push back
In response, developing countries have implemented nearly 250 trade-defence measures against Chinese imports since 2022. Brazil, a key member of the Brazil, Russia, India, China and South Africa (BRICS) alliance, has enacted over 120 interventions, including increased tariffs on auto parts, telecommunications equipment, and steel. Indonesia banned the Chinese-origin app Temu, citing concerns over predatory pricing that could harm local businesses.
Bangladesh and South Africa have also expressed concerns. Bangladesh’s former Prime Minister, Sheikh Hasina, sought a more equitable trade relationship with China, but after negotiations, China laughingly committed to import Bangladeshi mangoes. South Africa, facing a doubling of Chinese exports since 2016 amid economic stagnation, has raised similar issues.
The hidden cost: global plastic waste
An often-overlooked consequence of China’s dumping of cheap goods is the exacerbation of global plastic waste. The proliferation of low-cost, single-use plastic products and the famously unreliable quality of Chinese-produced goods not only undermines local manufacturing but also contributes significantly to environmental degradation. Developing countries, lacking robust waste management infrastructure, struggle to cope with the influx of disposable plastics. This leads to increased pollution, harming ecosystems and public health
China’s export of plastic goods, ranging from packaging materials to consumer products, adds to the mounting global waste crisis. As these items are of poor quality, unreliable and deliberately designed cheaply and for short-term use, they quickly become waste, overwhelming landfills and polluting oceans. The environmental burden disproportionately affects the so-called Global South, where inadequate recycling facilities fail to manage the surge effectively.
The need for sustainable solutions
The world is at a crossroads. Nations must act together to call out Chinas underhanded tactics and punitively challenge it. While affordable goods from China appear to benefit consumers, the benefits are of the same low quality as much of Chinas products. The long-term implications for domestic industries and the environment are dire. There is a pressing need for sustainable trade practices that re-balance China’s unfair advantages gained often through oppression of its people.
Countries must advocate for fair trade agreements that protect local industries and include provisions for environmental protection. Manufacturers should become responsible for the end of the life of their products. Investing in domestic manufacturing, particularly in sustainable industries, can reduce reliance on imported goods and mitigate environmental impacts.
The deluge of cheap Chinese goods presents a multifaceted challenge to the world. Beyond economic disruptions, the surge contributes significantly to global plastic waste, imposing environmental and health costs on nations least equipped to manage them. Addressing this issue requires a collaborative effort to promote fair trade, support local industries, and implement sustainable environmental practices.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
