{"id":953,"date":"2026-05-29T03:32:21","date_gmt":"2026-05-29T03:32:21","guid":{"rendered":"https:\/\/asianewscast.com\/2026\/05\/29\/the-double-china-shock-how-beijing-is-disrupting-both-developing-and-advanced-economies\/"},"modified":"2026-05-29T03:32:21","modified_gmt":"2026-05-29T03:32:21","slug":"the-double-china-shock-how-beijing-is-disrupting-both-developing-and-advanced-economies","status":"publish","type":"post","link":"https:\/\/www.asianewscast.com\/?p=953","title":{"rendered":"The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies"},"content":{"rendered":"<figure id=\"td-story-image\" class=\"td-media td-media--story\">\n<div class=\"td-img\"><img decoding=\"async\" alt=\"The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies\" title=\"The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies\" src=\"https:\/\/thediplomat.com\/wp-content\/uploads\/2026\/01\/sizes\/td-story-s-1\/thediplomat_2026-01-08-013349.jpg\"><\/div><figcaption class=\"td-caption\"><span>Credit: <a href=\"https:\/\/www.shutterstock.com\/image-photo\/tianjin-china-december-17th-2016-workers-575714311?trackingId=467edb4e-51ba-43d8-855f-727633fcbdcb\" target=\"_blank\">Shutterstock<\/a><\/span><\/figcaption><\/figure>\n<section id=\"tda-gated-body\" class=\"td-23-story-body td-prose tda-gated tda-gated--locked\" data-pid=\"p309633\">\n<p><span style=\"font-weight: 400\">Beyond embodied intelligence and fusion energy, China\u2019s <\/span><a href=\"https:\/\/www.wko.at\/ktn\/aussenwirtschaft\/euclera-translation-15th-five-year-plan-2026-2030-.pdf\"><span style=\"font-weight: 400\">15th Five-Year-Plan<\/span><\/a> <span style=\"font-weight: 400\">contains a segment which may get overlooked: the so-called traditional industries. This code-name represents the low-tech industries which helped China industrialize in the past, including the emblematic Made-in-China textile industry. The fact that traditional industries remain high in the new priorities suggests that China intends to keep making low-tech goods alongside its push into advanced technology.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">The question this raises is whether there is still room for other countries. If China competes simultaneously with both advanced and developing economies, is there room left for the rest of the world?<\/span><\/p>\n<p><b>Why China Keeps Making Everything<\/b><\/p>\n<p><span style=\"font-weight: 400\">As countries move up the value chain, they typically move on from relying on labor-intensive industries to more capital-intensive industries. For instance, Britain does not export large quantities of textiles as it once did in the 19th century, having shifted its economy toward knowledge-intensive and consumer-focused service industries, such as finance.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Anyone expecting this transition in China is still waiting. As articulated by <\/span><a href=\"https:\/\/www.gov.cn\/yaowen\/2023-05\/05\/content_5754275.htm\"><span style=\"font-weight: 400\">Xi Jinping<\/span><\/a><span style=\"font-weight: 400\"> himself, China\u2019s strategy is not to downgrade these industries into the \u201clow-end\u201d bracket or abandon them, but transform and upgrade them so they remain relevant on the global stage. This reflects Beijing\u2019s broader desire to avoid deindustrialization.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Moreover, China aims to upgrade rather than merely retain these industries. Two ministries and three state institutions recently published <\/span><a href=\"https:\/\/news.chemnet.com\/news-5220.html\"><span style=\"font-weight: 400\">an action plan<\/span><\/a><span style=\"font-weight: 400\"> to help enterprises accelerate the transformation to the higher end of the value chain, from \u201cMade in China\u201d to \u201cChinese Brands.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400\">Although China now has the capital and expertise necessary to grow capital-intensive industries, Beijing is simultaneously continuing labor-intensive manufacturing. A likely <\/span><a href=\"https:\/\/www.economist.com\/finance-and-economics\/2026\/05\/21\/the-other-china-shock\"><span style=\"font-weight: 400\">explanation<\/span><\/a><span style=\"font-weight: 400\"> is that the scale of China\u2019s economy and uneven development among its provinces allow Beijing to move these industries inland rather than abroad \u2013 something no previous industrializing nation could do at comparable scale.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Staying with textiles, China continues to globally dominate in both overall production and exports, accounting for <\/span><a href=\"https:\/\/atlas.hks.harvard.edu\/explore\/marketshare?exporter=country-156\"><span style=\"font-weight: 400\">over 35 percent of the global market share<\/span><\/a><span style=\"font-weight: 400\">, the largest share held among China\u2019s manufacturing sectors. There are not many signs of Beijing\u2019s loss of interest, as the National Bureau of Statistics (NBS) recorded a 4.3 percent year-on-year <\/span><a href=\"https:\/\/www.texleader.com.cn\/en\/news-35363.html\"><span style=\"font-weight: 400\">increase in investment<\/span><\/a><span style=\"font-weight: 400\"> in the textile industry, 5.2 percent in the apparel industry, and 12.3 percent in the chemical fibers. This growth outperformed all other manufacturing sectors.\u00a0<\/span><\/p>\n<p><b>The End of the Virtuous Cycle<\/b><\/p>\n<p><span style=\"font-weight: 400\">As countries move up the economic ladder, wages increase and labor-intensive manufacturing becomes uncompetitive. The industries eventually migrate to lower-wage countries, where the same process repeats. Over time, as those countries grow wealthier and their costs rise, they move on to more advanced production. In East Asia, this cycle has defined development since the 20th century and has been termed the \u201c<\/span><a href=\"https:\/\/unctad.org\/system\/files\/official-document\/osgdp20043_en.pdf\"><span style=\"font-weight: 400\">flying geese<\/span><\/a><span style=\"font-weight: 400\">\u201d paradigm. The region\u2019s industrialization has long been led by Japan as the lead goose. As Japan grew rich, its labor-intensive industries migrated first to the Asian Tigers, and later to China and Southeast Asia.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">This virtuous cascade of industrialization and development now appears to be over, as China\u2019s light industry overall has been expanding in recent years, and the migration is not happening at the predicted scale. The light industry in China still accounts for a quarter of all exports, remaining <\/span><a href=\"https:\/\/en.qstheory.cn\/2025-10\/09\/c_1133513.htm\"><span style=\"font-weight: 400\">the largest export sector<\/span><\/a><span style=\"font-weight: 400\">. Thus, China\u2019s continued competitiveness in low-tech manufacturing exports is harming established manufacturers in Southeast Asia, not supporting industrialization.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">The Financial Times reported that Malaysian and Indonesian labor-intensive manufacturing companies are going <\/span><a href=\"https:\/\/www.ft.com\/content\/ea4c95c0-af00-4b79-8b7e-4bbe6d5e19f9?segmentId=776b81d7-dd92-c731-e669-99cdd37d3a96&amp;syn-25a6b1a6=1#myft:my-news:rss\"><span style=\"font-weight: 400\">out of business <\/span><\/a><span style=\"font-weight: 400\">because of the strong competition from Chinese exports. In Indonesia\u2019s textile industry, this has led to 250,000 lost jobs since 2021. In the case of the Malaysian plastic industry, even protective trade measures of the Malaysian government did not help the sector from getting into trouble. Southeast Asia is also increasingly <\/span><a href=\"https:\/\/www.ft.com\/content\/ea4c95c0-af00-4b79-8b7e-4bbe6d5e19f9?syn-25a6b1a6=1\"><span style=\"font-weight: 400\">dependent<\/span><\/a><span style=\"font-weight: 400\"> on China for both industrial inputs and finished goods like EVs and green tech.<\/span><\/p>\n<p><b>The Two Shocks<\/b><\/p>\n<p><span style=\"font-weight: 400\">It appears that the \u201cfirst\u201d China shock, which describes the low-cost, low-tech Chinese exports destroying manufacturing in <\/span><a href=\"https:\/\/www.nytimes.com\/2025\/07\/14\/opinion\/china-shock-economy-manufacturing.html\"><span style=\"font-weight: 400\">advanced<\/span><\/a><span style=\"font-weight: 400\"> economies (mainly the United States) during the 2000s, continues to shock economies \u2013 and just not the advanced ones.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">On top of that, both industrializing and advanced economies are now going through the second China shock, which is impacting medium and high-tech manufacturing through China\u2019s advantage and scale of manufacturing. This prevents <\/span><a href=\"https:\/\/rhg.com\/research\/chinas-next-generation-industrial-policy\/\"><span style=\"font-weight: 400\">industrializing<\/span><\/a><span style=\"font-weight: 400\"> economies from upgrading their industrial base and displaces established industries in advanced economies. The result is a Double China Shock \u2013 hitting developing and advanced economies alike, from opposite ends of the value chain.<\/span><\/p>\n<p><span style=\"font-weight: 400\">The <\/span><a href=\"https:\/\/rhg.com\/research\/chinas-next-generation-industrial-policy\/\"><span style=\"font-weight: 400\">European Union and ASEAN<\/span><\/a><span style=\"font-weight: 400\"> have been most affected. For Europe, which was less devastated by the first China shock than the U.S. and managed to keep its industrial base, the second one became a \u201c<\/span><a href=\"https:\/\/www.politico.eu\/article\/europe-china-emmanuel-macron-foreign-investment-trade\/\"><span style=\"font-weight: 400\">life-or-death moment<\/span><\/a><span style=\"font-weight: 400\">,\u201d according to French President Emmanuel Macron. The second China shock is impacting mainly Europe\u2019s <\/span><a href=\"https:\/\/vreme.com\/en\/ekonomija\/nemacka-indistrija-izvoz-u-kinu-auto-industrija-kineski-automobili\/\"><span style=\"font-weight: 400\">car industry,<\/span><\/a><span style=\"font-weight: 400\"> but also <\/span><a href=\"https:\/\/www.euronews.com\/business\/2026\/05\/26\/industrial-sovereignty-five-sectors-where-the-eu-is-critically-dependent-on-china\"><span style=\"font-weight: 400\">green industries<\/span><\/a><span style=\"font-weight: 400\"> such as solar and wind energy. <\/span><a href=\"https:\/\/www.ey.com\/de_de\/newsroom\/2026\/02\/ey-industriebarometer-q4-2025\"><span style=\"font-weight: 400\">EY reported<\/span><\/a><span style=\"font-weight: 400\"> that Germany, Europe\u2019s largest economy and industrial core, has lost 1 in 20 industrial jobs since 2019 \u2013 a consequence felt beyond Germany\u2019s borders, as Central and Eastern European economies deeply integrated into German supply chains absorb the knock-on effects.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">The first issue of this shock lies in China becoming more self-sufficient, meaning it imports less from advanced economies. In Germany\u2019s case, exports to China have <\/span><a href=\"https:\/\/rhg.com\/research\/germanys-china-shock-revisited\/\"><span style=\"font-weight: 400\">dropped <\/span><\/a><span style=\"font-weight: 400\">by 23 percent since 2022, caused mainly by the 66 percent decrease in car exports in the same period.The second problem is the increasing Chinese competition in <\/span><a href=\"https:\/\/www.cer.eu\/publications\/archive\/policy-brief\/2026\/china-shock-20-cost-germanys-complacency\"><span style=\"font-weight: 400\">third markets<\/span><\/a><span style=\"font-weight: 400\">, such as Southeast Asia. The final issue is Chinese competition arriving in the home market, where Europe is facing an unprecedented <\/span><a href=\"https:\/\/www.ft.com\/content\/5529010d-a1c0-41f6-b7eb-fd916ffcc5ae?syn-25a6b1a6=1\"><span style=\"font-weight: 400\">surge <\/span><\/a><span style=\"font-weight: 400\">in Chinese EV imports. Together, these three pressures leave European industry with few safe markets remaining.\u00a0<\/span><\/p>\n<p><b>Could Change Come From China?<\/b><\/p>\n<p><span style=\"font-weight: 400\">The pressure could ease if China were to invest in manufacturing abroad and support localization, effectively migrating some of its industries. Chinese outbound foreign direct investment (FDI) has doubled since <\/span><a href=\"https:\/\/www.reuters.com\/world\/china\/chinese-greenfield-investment-europe-reaches-new-record-newspaper-reports-2026-05-18\/\"><span style=\"font-weight: 400\">2020<\/span><\/a><span style=\"font-weight: 400\">, and greenfield investment in Europe reached a record in 2025. However, Rhodium Group <\/span><a href=\"https:\/\/rhg.com\/research\/chinas-next-generation-industrial-policy\/\"><span style=\"font-weight: 400\">research<\/span><\/a><span style=\"font-weight: 400\"> showed that counterintuitively, China\u2019s recent FDI expansion does not support industrialization in the countries receiving its investment. Rather than bringing the benefit of localization, the FDI reinforces their dependency on Chinese inputs, technologies, and other high-value activities that Chinese multinationals retain at home.<\/span><\/p>\n<p><span style=\"font-weight: 400\">China\u2019s domestic trajectory could also shift the outlook. Last week, Beijing announced it was <\/span><a href=\"https:\/\/news.cctv.com\/2026\/05\/22\/ARTIbVPK8tMffuSA5HSjuZX4260522.shtml?mc_cid=789273e437&amp;mc_eid=c9bb6b54f2\"><span style=\"font-weight: 400\">relaxing the <\/span><i><span style=\"font-weight: 400\">hukou<\/span><\/i><\/a> <span style=\"font-weight: 400\">system, which has long hampered the labor force in less developed provinces. Making it easier for Chinese workers to migrate to higher-wage areas could, over time, push up wages in low-tech industries and erode their competitiveness. Whether this materializes, however, is uncertain, as Beijing is already investing heavily in automation, which could offset rising labor costs and keep low-tech manufacturing competitive regardless.\u00a0<\/span><\/p>\n<p><b>Shared Problem, Shared Solution: The Case for a Europe-ASEAN Partnership<\/b><\/p>\n<p><span style=\"font-weight: 400\">The very fact that the Double China Shock impacts almost everyone creates unexpected common ground. Europe and Southeast Asia find themselves facing a version of the same problem, and that shared pressure opens space for cooperation neither side has previously prioritized.<\/span><\/p>\n<p><span style=\"font-weight: 400\">First, Europe should understand what the China shock means for Southeast Asian countries. The region has long been a low priority for the EU, which is evident from the <\/span><a href=\"https:\/\/policy.trade.ec.europa.eu\/eu-trade-relationships-country-and-region\/countries-and-regions\/association-south-east-asian-nations-asean_en\"><span style=\"font-weight: 400\">low number<\/span><\/a><span style=\"font-weight: 400\"> of free trade agreements between the bloc countries. The Double China Shock creates a political window to accelerate free trade negotiations with impacted ASEAN countries such as Thailand and Malaysia, and open new ones with other potential partners.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">But trade agreements alone are not enough. Through direct investment in local manufacturing capacity using European technology, Europe can support a genuinely mutual diversification strategy: ASEAN gains an alternative to Chinese goods and a more stable export destination, while Europe gains diversified supply chains and a new market.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">The timing matters. Southeast Asia\u2019s<\/span><a href=\"https:\/\/www.ft.com\/content\/ea4c95c0-af00-4b79-8b7e-4bbe6d5e19f9?segmentId=776b81d7-dd92-c731-e669-99cdd37d3a96&amp;syn-25a6b1a6=1#myft:my-news:rss\"> <span style=\"font-weight: 400\">long reliance<\/span><\/a><span style=\"font-weight: 400\"> on the United States as an export destination is becoming increasingly uncertain under the Trump administration\u2019s tariffs \u2013 and those same tariffs are redirecting <\/span><a href=\"https:\/\/www.ft.com\/content\/16d0336b-d855-42ae-b0a7-d509d21cec9b?syn-25a6b1a6=1\"><span style=\"font-weight: 400\">Chinese exports<\/span><\/a><span style=\"font-weight: 400\"> toward ASEAN, compounding the pressure the region already faces. The window will not stay open indefinitely. Recognizing that Europe and Southeast Asia are facing different expressions of the same shock is the first step toward turning a shared problem into a shared strategy.<\/span><\/p>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Credit: Shutterstock Beyond embodied intelligence and fusion energy, China\u2019s 15th Five-Year-Plan contains a segment which may get overlooked: the so-called traditional industries. This code-name represents the low-tech industries which helped China industrialize in the past, including the emblematic Made-in-China textile industry. The fact that traditional industries remain high in the new priorities suggests that China [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":954,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-953","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies - Asia Newscast<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.asianewscast.com\/?p=953\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies - Asia Newscast\" \/>\n<meta property=\"og:description\" content=\"Credit: Shutterstock Beyond embodied intelligence and fusion energy, China\u2019s 15th Five-Year-Plan contains a segment which may get overlooked: the so-called traditional industries. 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Asia Newscast","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.asianewscast.com\/?p=953","og_locale":"en_US","og_type":"article","og_title":"The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies - Asia Newscast","og_description":"Credit: Shutterstock Beyond embodied intelligence and fusion energy, China\u2019s 15th Five-Year-Plan contains a segment which may get overlooked: the so-called traditional industries. This code-name represents the low-tech industries which helped China industrialize in the past, including the emblematic Made-in-China textile industry. The fact that traditional industries remain high in the new priorities suggests that China [&hellip;]","og_url":"https:\/\/www.asianewscast.com\/?p=953","og_site_name":"Asia Newscast","article_published_time":"2026-05-29T03:32:21+00:00","og_image":[{"width":600,"height":360,"url":"https:\/\/www.asianewscast.com\/wp-content\/uploads\/2026\/05\/thediplomat_2026-01-08-013349-FQmOPn.jpg","type":"image\/jpeg"}],"author":"ANC News Desk","twitter_card":"summary_large_image","twitter_misc":{"Written by":"ANC News Desk","Est. reading time":"7 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.asianewscast.com\/?p=953#article","isPartOf":{"@id":"https:\/\/www.asianewscast.com\/?p=953"},"author":{"name":"ANC News Desk","@id":"https:\/\/www.asianewscast.com\/#\/schema\/person\/2c9f588ee00d3b2b92133babac793e30"},"headline":"The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies","datePublished":"2026-05-29T03:32:21+00:00","mainEntityOfPage":{"@id":"https:\/\/www.asianewscast.com\/?p=953"},"wordCount":1379,"publisher":{"@id":"https:\/\/www.asianewscast.com\/#organization"},"image":{"@id":"https:\/\/www.asianewscast.com\/?p=953#primaryimage"},"thumbnailUrl":"https:\/\/www.asianewscast.com\/wp-content\/uploads\/2026\/05\/thediplomat_2026-01-08-013349-FQmOPn.jpg","inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.asianewscast.com\/?p=953","url":"https:\/\/www.asianewscast.com\/?p=953","name":"The Double China Shock: How Beijing Is Disrupting Both Developing and Advanced Economies - 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