One day, China suddenly stops all exports. What happens to the world economy?

Question

I am more curious about the immediate effects on local and global socio-economics rather than the likelihood of the rest of the world declaring war on China or were the other countries would get their goods from.

One day, China stops all exports just out of the blue. The reason why they stopped exporting is not important. I am just interested in the consequences of this event on the rest of the world economy.

What would happen the few days immediately following this event? Would businesses stop running? Would it lead to fatalities because people can't get something they need that's normally made in China?

Answer 1

With many World Building questions phrased as "what if ________," it turns out that the thing that happens is not nearly as important as how it happens.

For example, take the case where we take your question literally. Absolutely nothing out of the ordinary happens outside of China, but they just stop exporting. They carry on as if the exports were completed (potentially loading empty shipping carriers onto ships. It takes between two weeks and a month for a cargo ship to cross the Pacific, so America doesn't even notice until then. Panic ensues as massive massive quantities of orders are now at least a month behind.

Alternatively, if China announces they're no longer exporting, there would be a whole bunch of very rapid talks at a very high level. China's a reasonable chunk of the world economy. Given what we saw in the "Great Recession," our financial systems are stacked too much to even let a small country like Greece let their governmental obligations go. To have China simply stop fulfilling obligations, not just as a government, but as a society, would rock everything.

Also worth noting is that, if China stopped exporting, they'd have a labor problem on their hands. They have billions of people living in cities dependent on manufacturing for export as a way of life. Needless to say, this is not the kind of harmony the Chinese governing party wants to see.

There is a solution: start making products for the government, rather than for other countries. You didn't want to explore the "everyone goes to war against China" venue, but there's not many thing they could have the factories producing besides weapons. China may, instead, go to war with everyone else!

Tl/Dr: how this happens matters more than what happens, and given how incredibly unlikely this event is, the range of "hows" are particularly exotic, and particularly hard to predict. In addition, the world financial system is literally more complicated than anyone knows (as in, even the experts don't know), so something may happen there.

Answer 2

Total chaos in the rest of the world, followed by total chaos in China.

Consider just how much is labeled "made in China" these days. Then think about how much contains some parts which are made in China. If those products and parts are no longer available, what then?

As Cort pointed out, the Chinese are getting paid for their exports. If their markets suddenly go away, they have a problem. Even if they fulfill all existing contracts and simply refuse to sign any new ones, their internal markets would crash.

Answer 3

Prices would skyrocket. Manufacturing would ramp up like nuts.

In the USA, there would be more anxiety than real harm. Cost of living would spike for a bit, which would cause most problems. We are dependent on foreign oil, though, and rare earths, so electronics would rocket up in price the most, but only because we have such limited supply--mostly from China. We have everything we need in raw materials, though, just not in fully realized industrial supply.

After some sort-term anxiety, though, we'd resupply or restart native production in anything especially painful.

Rare earths are a biggie. Some people are trying to reestablish refineries here to limit this problem, as it happens.

Answer 4

The world would simply buy its goods from somewhere else (probably a lot of somewhere else's). After a blip of disruption the world would quickly adapt.

China on the other hand would be deeply and permanently affected. Their economy would collapse, people would riot, their government would be in danger of falling. China would also become very dangerous as any government that stayed in or took power would likely be looking to foreign adventures to bolster the economy and distract the Chinese people. In this regard the world would not do as well.

Answer 5

The US has essentially threatened military action against Iran if they block oil shipments through the Strait of Hormuz, and has no problem ignoring warnings to keep bombers away from artificial Chinese islands, so it's no stretch to say that weapons would be drawn in order to keep exports from stopping completely. Hopefully there would be some sort of transition period during which China agrees to (rapidly) ramp down exports rather than cutting them off cold turkey, which should help avert open warfare. Economic sanctions wouldn't work; they're already refusing to sell stuff to you.

But it would be hard to define what "China" is for the purposes of this question. Are we only considering products made by wholly Chinese-owned companies? Then the global impact would not be much. But many western companies (not just Apple) have operations in China. If the Chinese government blocks or seizes those other companies' assets, then things would get complicated. In any case, what the OP is asking about would almost unquestionably be seen as an act of aggression.

Edit: It would be interesting to see how China then intends to get back the $1.3 trillion owed to it by the US, as well as other countries' debt. Do they simply write it off? Are they self-sufficient so they can survive without imports (how will they pay for them? Money generated by purely domestic ventures?)? This would be a sticky situation for the Chinese as well.

Answer 6

Many answers point to the idea of substitution, and the amount of time it may potentially take for substitution to take place. Assuming the disruption of trade isn't a hostile act by China (lets imagine that China is under total quarantine because the Andromeda strain has broken out there), then there will be many knock on effects.

Low wage nations like India, Viet Nam, Indonesia and so on which have functioning industrial bases will see their wages rise dramatically since they will suddenly be on high demand. Billions of dollars of capital investment will also flow into these nations to start creating the factories which will be needed to replace the ones no longer available. This will create massive social and political turmoil as the older social and cultural orders are overturned by the new wealth.

The United States has been taking steps to increase the production of Rare Earth elements both in the continental US (reopening old mines, for example), and experimenting with mining the deep sea muds off the coast of Hawaii to recover these elements. These substitution efforts will increase. Africa may descend into chaos since the Americans and Europeans will not be inclined to let their industries be held hostage by raw material shortages, and substitution using clever design and local mining will do for African resources what American Fracking has done for global oil prices. Kicking resource prices down will demolish many third world economies if they don't have the work force and infrastructure for industrial production.

Older electronics will become repurposed and forced to stay in service for far longer than they were designed for. An entire service industry of refurbishing old machines will grow rapidly. As well, the software industry will focus on changing code in order to run more efficiently on older machines. "Bloatwear" will be out, and very elegant, stripped down code will be in. This will have interesting effects in the future as new production finally comes on stream, since the hardware will reflect the new ideas of coding. This will also cement the Western military advantage, since the American military and US civil society has the most and most advanced computers and IT infrastructure in both qualitative and quantitative terms. If you can keep using more and better computers than anyone else, then you will be farther ahead when new computer production comes on line.

As part of the substitution effort, the US may also jump start many experimental technologies like photonics computers, using DNA as a computing substrate or quantum computers which have no counterparts being manufactured in China (or anywhere else). The wait for new computers will then change into a wait for new low end computing devices like small microprocessors for cars or stoves, rather than higher end devices.

Since in the United States there is a "maker" culture of large size and sophistication, there will be a resurgence of thousands if not millions of new "brands" as small shops kickstart to making in demand items, while larger conglomerates which depend on imports will be left hanging or collapse. This might resemble the 1920's, when you could choose from almost 100 different automobile companies for your driving needs.

So for areas where there already is industrial infrastructure, the import substitution effort will take place quickly creating islands of relative prosperity. Developing nations which are on the way will rapidly develop to replace the mass production capabilities of China, but this may take a long time. Resource based economies might take a huge hit since there is no longer Chinese money propping them up, and Western nations will most likely be taking steps to use their own resources.

Local effects like wars, revolutions, political movements and so on will she to be looked at on a very detailed case by case basis.

Answer 7

A lot of manufacturing would grind to a halt. The important thing to know...

From wiki:

China's rare earth industry makes up 97 percent of rare mineral trade worldwide.

The number might be wrong these days but the principle is still applicable. If China shuts down exports then any manufacturing depending on Rare Earths will stop. That's not something you can quickly spin up a replacement for.

What will that kill? There's a partial list at https://en.wikipedia.org/wiki/Rare_earth_element#List but the short answer is "lot's of important modern tech". Like Neodym magnets, lasers, fibre repeaters...

There'll be other similar problems due to other industries that China has near monopolies on, but the Rare Earth industry is a good example people can relate to.

Answer 8

First it should be indicated if China stops producing the goods all together, or simply stops exporting them, while still keeping production ongoing.

The reason I emphasize this point is to tackle the worldwide prices of raw material. In recent years a drop in the rate of construction of new properties in China has led to worldwide drop in the price of structural steel due to the decrease in its demand.

Accordingly, ceasing the production of all China-made goods would lead to an overwhelming drop in all sorts of raw material. This will cause a commodities market crash which will in turn crash all financial markets and thus cause a worldwide financial crisis that will be almost impossible to recover from.

The consequences of such a crisis is discussed plenty in the other answers. I just wanted to focus on the input perspective of the idea.