According to analysis from Business Standard, Chinese mercantilism has been more globally consequential than any other economic shock or policy choice in reshaping the world this millennium. The assessment challenges the conventional view that post-World War II global shocks, including the 1970s oil embargoes and the 2008 financial crisis, have had greater worldwide impact. Chinese mercantilism is characterized as a persistent force rather than a one-off event, often conflated with China's broader growth performance that has been underappreciated globally.
As reported by Business Standard, Chinese mercantilism contributed significantly to the Great Moderation period following the high inflation of the 1970s. The analysis identifies three key benefits: first, consistent supply of low-priced manufactured goods that helped global inflation decline and remain low until the Covid-19 pandemic. Second, the renewables revolution, particularly solar energy, has been made possible by low-cost Chinese solar panels and batteries, making emissions reductions compatible with growth. Third, cheap Chinese solar panels have broadened energy access in developing countries, with Pakistan's solar accounting for up to one-fifth of grid-supplied electricity.
According to the analysis, Chinese mercantilism has accelerated de-industrialisation in politically consequential parts of the US, building on earlier research showing the first China Shock's impact on American manufacturing. The current assessment identifies a second China shock devastating Germany's auto sector, which affects the broader Mittelstand industrial ecosystem. Additionally, a third China shock has thwarted industrialisation and development possibilities for low- and middle-income countries through what the analysis describes as a 'squeeze' that prevents factories from being built, export markets from being entered, and capabilities from being accumulated.
Recent research from Princeton University's ZERO Lab projects that by 2030, the One Big Beautiful Bill Act (OBBBA) will raise US household and business energy costs by $28 billion. However, the energy landscape is evolving rapidly as wind and solar became 53% and 41% cheaper than fossil fuels respectively in 2024. The months-long closure of the Strait of Hormuz has led countries worldwide to embrace renewables, with data centers now accounting for around half of new US electricity demand. Despite these challenges, the analysis suggests that the American consumer economy can no longer run on fossil fuels, requiring the US to scale up renewables to maintain growth, with reviving the Inflation Reduction Act as an obvious first step.
