Introduction

The trade war between the US & China has reached a point that it is now starting to settle within the international community. The state has started to accept the new renegotiated tariff terms with the US, and tariffs on Chinese goods remain approximately at 51%. This entire story provides three fundamental insights into international trade and economics. First, the US remains a dominant power in terms of trade regulation, even though it does not produce nearly as China. Second, the US is still heavily dependent on imports to maintain its economy and to strengthen the dollar. Third, China is still an extremely export and production-oriented economy, and it is trying to navigate its way around the global trade war as the US remains the most favorable trade partner due to the dollar.

China industrial profit fell by 9.1% in May 2025, and as per Yu Weining's statement, a statistician at the National Bureau of Statistics (NBS). The factory gate price, i.e., Producer Price Index (PPI), declined by 2.5% YoY in nearly 2 years. This signifies that the factories are charging less for their products, signifying a weak demand. Keeping in mind that Trump still has more than 3 years left in office, will Karl Marx's prophecy be materialized, which signifies capitalism (through industries) will lead to overproduction & underconsumption, resulting in the Falling rate of Profit.  Hence, the society will ultimately collapse. Will the extreme Production capability of China lead to its demise?

Chinas Hyper-Industrialism

China, often called the factory of the world, produces almost 31% of global manufacturing output (2024-2025), leading in almost every sector. Almost equal to the US and EU combined, which hold 16% and 15% of global production. China is the world's largest energy consumer for sustaining its massive industry. The global energy consumption is almost 600 exajoules (EJ), where China's share is almost 170 EJ. China also dominates in global exports, with a value reaching $ 3.6 trillion, about 15% of the global export share.

China's industrial share as of 2025, indicates that China dominates all key production areas, including steel and cement (54% and 51% of world output, respectively), solar panels and electric vehicle batteries (about 70% and 80%), textiles and apparel (almost 40%), semiconductor (almost 25%) and shipbuilding (50% market share). Additionally, 85% of rare earth metals, essential for electronics and defense apparatus, are processed in China. Electric vehicles represent a growing trend, with 60% of production and exports originating from China. Forty percent of pharmaceutical ingredients are exported from China. Moreover, China is a significant contributor to Electronic Manufacturing Services (EMS), accounting for 70% of global assembly.

Can China sustain this industrialization?

Industry demands market and consumers to sustain productivity and profit, the profit in return is utilized to increase production, and the increased production demands for greater market. This led to a loop and a paradox that cannot be sustained without global consumerism. In the modern world, the demand is not just for the market, but a market that can be as efficient and profitable as the US.

The US market is the very reason China keeps its currency weaker as compared to the US dollar. A weaker yuan makes Chinese goods cheaper in the global market, giving manufacturers a competitive edge. Other than that, a weaker Yuan can help counter the US high tariffs by lowering the price of Chinese products in the market. This included with the Chinese policy of Economy of Scale, i.e., the level of production is so high that the cost of production becomes low. Economy of scale also enhances the experience curve, i.e., the unit costs of a company's goods decrease steadily as it produces more of them. Also, cumulative experience helps increase product quality.

This strategy may solve China's problem toward the US market to some extent, but data shows China's market is still suffering from the US tariffs. If China wants to sustain its industrialization, three changes are direly required that to at the global level, transforming the fundamental structure that favors the rising power. First is that a new currency is required to break the dollar hegemony. This concept is increasingly becoming a threat to the US, as seen by Trump's aggressive reaction towards the proposal of a new currency by BRICS. Second is that China has to become a stronger creditor country, to increase its supply and flow of Yuan. This may strengthen the yuan as it may become the primary reserve currency, and a strengthened Yuan may lead to increased prices of Chinese goods. But this will compel states to borrow exclusively from China for international trade, ultimately stabilizing the monetary supply for China. Third, and most importantly, a new & diverse market that is not limited to the US and the dollar, prioritizing a more South-South approach.

Identifying new markets: benefits and concerns for other regions/states

As industries strive for profit, they vigorously find new markets that have enough consumer base to sustain production. In the case of China, the most closed-off market in terms of standards compared to the US is the EU. The EU can sustain or afford the luxury and high-grade products produced by China, especially the emerging technologies like EVs and electronic products. India, due to its immense population of 1.4 billion, can provide a major consumer base for China. India, in a rapid development phase, aiming to expand its infrastructure and also consisting of the world’s biggest middle class, can provide a consumer base for products like textiles, apparel, steel, solar, construction equipment, etc.

Another market opportunity can be used from the ASEAN region, as this region follows the policy of Export-Oriented Industrialization (EOI), with a major focus on Western markets, especially the US. The majority of ASEAN countries suffer comparatively much less tariffs than China, which can provide an opportunity for China to assemble their products in ASEAN countries and then ship them to Western markets.

Regions and countries like the EU and India, and even Brazil, Russia & ASEAN countries, may benefit from China, provided they formulate policies to effectively sustain Chinese goods without destroying their domestic economy. These countries are industrially strong enough to benefit from the supply chain. That being said, still ASEAN countries did suffered from Chinese imports (Reuters Claim), and Trump in 2018 increased tariffs on ASEAN countries due to “Re-routing” (goods that are originally Chinese imports but re-routed to the US). But an assembly industry may fix these issues. Many other industries in the Global South will be unable to compete with Chinese goods due to a weak domestic industry. Like Africa and Central Asia, South Asia and Latin America can't provide a market for high-end products, while low-end finished goods will hinder their industrial progress.

Conclusion

The question remains: will China overcome the issue of overproduction and find new markets that can sustain Chinese goods? The answer remains entitled to China if it is successful in identifying new market, then surely it can sustain its industry. The US is not the entire world, and we should stop treating it as such. The dominance of the US in International Financial Institutions (IFIs) gives it an immense benefit; hence, China needs to increase its share in these financial institutions to expand its political influence. The regional blocks and states, especially in the south, can greatly benefit from this political-economic situation by importing the scarce resources to further enhance their industrial production, rather than directly importing finished products, hence achieving comparative advantage.

The Chinese approach of BRI and major infrastructure development in the Global South will further economically develop these countries, hence providing a potential future market for China and increasing the global demand. China can also follow the steps of the US by expanding its approach toward investment and transnational assembly processes. As of today, all of the major asset holding companies (all the top 10) are American/Western, which collectively hold approximately $50 trillion worth of global assets, giving the US a monopoly over global financial system. The dominance in the global economy cannot be just acquired by having a strong industry; a greater political acumen is required to navigate through the complex political-economic structure of the world.

Muhammad Zain Ul Haq is an International Relations analyst from Bahria University.