Analysts rebut 'Chinese overcapacity' claims amid political tensions

Recent claims by some Western politicians and media that China is facing industrial overcapacity are not supported by data, analysts said, denouncing these assertions as politically motivated attempts to undermine China's economy amid rising global trade protectionism.

These accusations of Chinese overcapacity are unsubstantiated, said Albert Park, chief economist at the Asian Development Bank, according to China Daily. Park said that the World Trade Organization addresses non-competitive practices with mechanisms like anti-dumping and countervailing duties, but there is a lack of strong evidence that any of those apply to China.

The international market success of China's emerging industries is the result of innovation and efficient cost control by Chinese firms, not excess capacity, Wichai Kinchong Choi, a senior vice president at Thailand's Kasikornbank, told Xinhua. He expressed dismay at how some developed nations have blamed China for their market challenges and restricted competition.

"It is unfair to specifically mention China's industrial policies and imply that China's competitive advantage is subsidized by the government," Robin Xing, chief China economist at Morgan Stanley China, was quoted as saying by China Daily.

Xing pointed out that many countries, including the U.S., adopt similar strategies to bolster strategic industries. The U.S. Inflation Reduction Act, for example, represents a substantial investment in clean energy and provides significant subsidies to the semiconductor sector, he said.

The latest debate comes as the global demand for new energy technologies, such as electric vehicles, is expected to surge. The International Energy Agency predicts that the demand for electric vehicles will reach 45 million by 2030, more than four times the demand in 2022.

However, according to the China Association of Automobile Manufacturers, China exported 1.203 million new energy vehicles in 2023, indicating that China's current capacity is far from satisfying a significant potential surge in demand for new energy products globally.

Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, expressed concern over the broader implications of the overcapacity narrative in a recent interview with Xinhua.

"This overcapacity idea is that you shouldn't produce more than you can sell domestically. If that was carried to an extreme, that would mean no trade globally. Everybody would just produce what they consume at home," he cautioned, adding that this "would be a complete and utter disaster for every economy."

With the U.S. elections approaching, analysts like Guo Kai, executive president of the think tank CF40 Institute, have suggested that political motives are overshadowing economic realities.

"The U.S. is raising the issue of Chinese overcapacity at this time for electoral purpose," Guo commented.