China Shock 2.0 Is Here | The Daily Spark | August 21, 2026

Apollo: China Shock 1.0 flooded global markets with cheap consumer goods in the 2000s, but China Shock 2.0 represents a sharper acceleration in manufacturing exports where the country now dominates advanced sectors like EVs and semiconductors through industrial policy and overcapacity, see the first chart below.

Brad Setser warns that, unlike the first shock, there's nowhere left to move production when China controls the cutting edge, especially as domestic demand is increasingly met by domestic production, leaving massive export surpluses to flood global markets, see the second chart below.

For more discussion, see: The Second China Shock - How This Time Is Different with Brad Setser | Markus' Academy | Ep. 165-1