China's new energy capacity: Not 'overcapacity' but capacity in need

Editor's note: Xin Ping is a Beijing-based international affairs commentator. The article reflects the author's opinions and not necessarily the views of CGTN.

Recently, the old narrative of "China's overcapacity" has resurfaced internationally, mischaracterizing the rapid growth of China's new energy sector as "excess production" and distorting its high-quality, globally beneficial products as "dumping."  

This argument is logically shaky and even more fragile in the face of hard data and facts. At its core, it is not a rational analysis grounded in economic indicators, but rather trade protectionism disguised in economic jargon – aimed at curbing China's rise in advanced manufacturing and preserving certain countries' monopolies in strategic industries.

By the standard definition in economics, China's new energy capacity is far from "excessive." Overcapacity typically means output significantly exceeds demand, leading to large-scale surpluses and sharp price declines.  

In China's case, that simply isn't happening. Take electric vehicles (EVs) as an example: In 2025, China's EV sales reached 16.49 million units, with exports at 2.62 million units, meaning the vast majority of production served domestic demand. Despite this enormous output, there is no serious inventory buildup; in fact, some popular models have waiting lists stretching several months. Such strong alignment between production and sales directly debunks claims of overcapacity.

Second, from a global supply-demand perspective, China's new energy capacity is not only not excessive; it is essential. According to the International Energy Agency, achieving global carbon neutrality will require installed renewable capacity to reach 11,000 gigawatts by 2030, triple the 2022 level. Current global supply falls far short of this target, and demand for green technologies continues to grow sharply.  

China has been the primary engine of this expansion, contributing over half of the world's newly added renewable energy capacity in 2023 and more than 60% in 2024. This clearly shows that what China is exporting is not "surplus" production, but urgently needed momentum for global development – quite literally fueling the world's decarbonization efforts.

Additionally, at the micro level of market competition, Chinese companies are not engaged in the so-called predatory dumping often alleged in the context of overcapacity. In 2024, the average profit margin of China's large industrial enterprises stood at about 5.4%, reflecting healthy profitability rather than loss-leading tactics.  

Price comparisons corroborate this conclusion: Chinese EVs such as the Ora Good Cat and BYD Atto 3 are often sold in Europe at prices roughly double those in China and yet the overseas profit margins are significantly higher than domestic ones. This price gap underscores that China's competitiveness derives from technological innovation, integrated supply chains and economies of scale – not from unfair pricing practices.

Finally, the "overcapacity" accusation against China lays bare a clear double standard. In the global division of labor, it is normal for countries to specialize according to their comparative advantages. Around 80% of US-produced chips are exported; Germany and Japan export nearly 80% and 50% of their automobiles, respectively. Yet none of them is accused of excess capacity because the uneven distribution of production capacity is a natural, market-driven economic phenomenon.  

However, when Chinese new energy products take the upper hand in the global market, the issue becomes politically charged, and China is labeled as exporting "overcapacity." Some countries’ attempts to shield themselves from competition by building "small yards with high fences" and imposing tariffs will neither solve their structural problems nor help to accelerate the global green transition.

China's production capacity is a force for global development. Amid the chilly winds of deglobalization, China remains committed to openness and cooperation, channeling its high-quality capacity into the global green growth agenda – a reflection of its responsibility as a major country.

The world will not prosper from isolated islands of protectionism but from interconnected continents of collaboration. In response to the rise of China's industries, the West should abandon zero-sum games, sharpen its own edge and partner with China to stabilize supply chains and deliver shared prosperity.

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