Chinese manufacturers are rushing to foreign markets as rising raw material prices, weak demand and excess production capacity reduce domestic profitability.
The latest inflation figures in China show increasing pressure on company profitability and even greater efforts to boost exports.
The producers in the country find themselves in a difficult situation as excess production capacity and weak domestic demand prevent them from passing on the rising raw material costs to consumers. This has led to a massive entry into export markets that offer higher profits, at least for now.
Exports are a key factor in ensuring the economy achieves its full-year growth target of 4.5 to 5 percent. Investment in fixed assets is in free fall, and weak data in the consumer price index indicates that efforts to stimulate local consumption are not yielding significant results.
The risk for China is that rising exports may not be a sustainable source of profit. A growing number of exporters may simply lower world prices, meaning manufacturers will make little profit from overseas sales.
At the same time, the influx of exports causes grievances and job losses abroad, prompting governments to raise trade barriers to protect domestic industries.
The European Union is debating ways to tighten its trade tools after winning a cap on imports of Chinese hybrid electric vehicles last month. Politicians sought to stem the flow of cars after local automakers such as Volkswagen announced tens of thousands of layoffs.
Chinese threat.