G-20 pushback on China exports weighs on FXI
A G-20 statement backed by 19 members criticized China’s export-driven model and urged countries with persistent surpluses to end policies that overrely on exports, adding pressure on the iShares China Large-Cap ETF (NYSE: FXI).
The G-20’s 19-to-1 split over China’s export-driven economic model signals growing global pushback against Beijing’s trade practices, signaling a global tariff wall that could spell trouble for Chinese equities.
As the world pushes back on cheap goods flooding markets, the iShares China Large-Cap ETF (NYSE: FXI ) faces headwinds.
A Rare Consensus Against Beijing The Group of 20 criticized China for its overreliance on exports for growth, in a joint statement issued by the U.S. and its allies at the recent G-20 finance ministers meeting in Asheville, N.C.
The coalition urged that countries with excessive and persistent external surpluses should end policies that “result in an overreliance on exports for growth" and cause harmful spillovers globally.
China was the only dissenter because it objected to certain sections, including the one about overreliance on exports. "The G-20 has rarely spoken with this degree of consensus on nonmarket distortions and overcapacity," noted Han Lin, China managing director for the Asia Group. by the Wall Street Journal.
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Treasury Secretary Scott Bessent emphasized the severity of the issue, stating that countries "pushing out a never-ending stream of cheap exports is not sustainable." Bessent added he had previously warned allies that the new U.S. "tariff wall" would divert Chinese goods to their shores, noting, "And unfortunately, I was right.” Global patience is wearing thin across Europe and Asia.
Japanese Finance Minister Satsuki Katayama observed that "everyone’s feelings have crossed a threshold," adding that nations decided they "had better not wait any longer to make our direction clear." Market Headwinds for FXI This geopolitical friction is translating to poor market performance.
While China’s exports surged 23.9% year-over-year in July, its domestic demand is weak.
China’s growing trade surplus with the EU has also fueled calls for tougher import restrictions, while Beijing faces criticism over industrial subsidies and an undervalued yuan.
The iShares China Large-Cap ETF is down about 3.1% over the last month and is down 8.6% year-to-date.
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