[Editorial] China Shock Spreads Across All Sectors: Where Is the Government Response?

China's ChangXin Memory Technologies (CXMT). Reuters-Yonhap News

Domestic semiconductor stocks swung sharply after reports that third-quarter revenue this year at Chinese DRAM maker ChangXin Memory Technologies (CXMT) would rise by about 600% year over year. Many are reminded of the nightmare of the LCD industry, which once held an unrivaled position in the market but was overtaken by China in the 2020s as the country rapidly advanced its semiconductor industry.

The Asia Business Daily has examined the impact of China’s growing competitive pressure, which is spreading across sectors ranging from automobiles to biotechnology, in a series of reports. Cumulative domestic sales of Chinese electric vehicle maker BYD this year have exceeded six times the figure for the same period last year. Chinese companies reportedly account for more than 70% of the global electric vehicle battery market, with seven companies from China making up that share.

We have little choice but to acknowledge the reality that China’s technological capabilities and price competitiveness have improved. But the time when the “China shock” could be treated merely as a matter of competition between individual companies has already passed. It is difficult to deny that large-scale state support lies behind the rapid growth of Chinese companies.

In response to China’s aggressive push, the European Union (EU) has belatedly proposed measures such as the Industrial Accelerator Act (IAA). It has also imposed tariffs of up to 45.3% on electric vehicles made in China. The United States, too, is blocking Chinese companies from entering its market through high tariffs and nontariff barriers.

The responses by the United States and Europe prompt us to reflect on whether we have been too complacent. South Korea’s basic tariff on passenger cars made in China is 8%, about half China’s 15% tariff. The Korean government has also drawn concern from the industry by excluding electric vehicles from discussions on production tax credits.

That does not mean that uniformly raising tariffs or responding with low-price competition would be the right answer. We must respond rigorously to unfair support for Chinese companies, while fundamentally focusing on improving product competitiveness and maintaining a technological edge. The government should assess, by industry, the scale of China’s competitive push and the vulnerabilities of domestic companies, and draw up a whole-of-government response covering finance, taxation, talent, supply chains and regulations. Once an industrial base is lost, it is extremely difficult to rebuild. We have no time to be complacent under the cover of the semiconductor boom.

This content was produced with the assistance of AI translation services.