China’s EVs could accelerate recovery – but trade restrictions threaten to stall growth at the starting line

Analysts say potential U.S. restrictions on China’s electric vehicle (EV) imports, a potential platform for growth in the coming years as the electric vehicle (EV) industry develops, could help the economic recovery regain momentum. This could be a further blow to the Chinese government’s efforts to do so.

U.S. Commerce Secretary Gina Raimondo said Tuesday that Chinese EVs could pose a risk because they collect “vast amounts of information about drivers.”

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“if [the industry is] unable to regularly export products overseas; [it] This will further worsen China’s current deflationary environment. [and] “Household and business sentiment towards economic recovery weakens,” said Dong Jinyue, senior economist at BBVA Research.

Dong said the EV issue has escalated into a national security issue for the United States, which will reignite geopolitical tensions and create further uncertainty over China’s growth prospects.

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A major increase in economic activity is welcome at this time to both boost growth and offset the drag on the beleaguered real estate sector that is weighing on the country’s post-pandemic recovery. right.

Sarah Tan, an economist at Moody’s Analytics, said car shipments will increase 69% year-on-year through 2023, reflecting China’s competitive advantage in lithium-ion battery cell production and lower labor costs compared to Japan and South Korea. He said it shows his sexuality.

“Foreign automakers are also setting up factories in China to take advantage of some of these advantages,” she added. “Manufacturers invested an additional 6.5% by 2023, mainly for the automotive, electrical equipment and high-tech electronics industries.

“At a time when authorities are keen to redirect the economy away from real estate, these developments will definitely be a drag,” Mr Tan said.

However, Counterpoint Research senior analyst Yang Wang said companies in the EV value chain need to be cognizant of the regulatory risks associated with entering the US market. He cited trade restrictions imposed on other Chinese companies in recent years.

“Further technical restrictions by the United States are unlikely to have the same impact.” [as they had in] “China is much more advanced in the EV field, especially in battery technology, and we can expect development in areas such as semiconductors and AI,” he said.

Direct competition with the United States is also expected. As the Biden administration pushes ahead with measures to restrict trade in Chinese electric vehicles and semiconductors, it has invested billions of dollars in domestic production of both products.

Heron Lim, assistant director and economist at Moody’s Analytics, said Chinese automakers are lagging behind American and Korean automakers in the U.S. market, with major customers in Asia and Europe.

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“This could fence off the market and constrain growth in what appears to be China’s next growth frontier.”

Wang Zicheng, a researcher at the Beijing-based think tank China Globalization Center, said the contribution of China’s EVs to the economy is still relatively small and should not be overstated.

“In 2023, China’s total exports will reach 23.77 trillion yuan (3.3 trillion US dollars), and the “three new products” that the Chinese government has heavily promoted – electric cars, lithium batteries, and solar cells – will total 1 trillion yen. “, which accounts for less than 5% of total exports,” he added.

“China’s EVs are certainly leading the world, but their contribution to the Chinese economy…”[should] do not have [be] Exaggerated. The housing industry accounts for a much larger share. ”