Editor's note: Li Lun, a special commentator for CGTN, is an assistant professor of economics at Peking University. The article reflects the author's opinions and not necessarily the views of CGTN.

The debate over China's manufacturing strength has moved beyond disputes over subsidies, market access and competition in individual industries. As Chinese firms advance from labor-intensive exports into electric vehicles, batteries, solar equipment, industrial robots and other technology-intensive sectors, some foreign commentaries have turned those sectoral disputes into a broader warning about global stability. The claim is no longer merely that Chinese companies are intensifying competition for established producers, but that the world may be unable to absorb what China produces, potentially creating an imbalance that could trigger the next global economic crisis.

A recent article in Foreign Affairs by Michael Froman, former US trade representative and current president of the US think tank Council on Foreign Relations, takes this argument to its broadest conclusion. Froman contends that policy-directed credit, industrial subsidies and local government incentives have created manufacturing capacity beyond what either China's domestic market or the world economy can absorb. His proposed solution is a coordinated arrangement in the spirit of the Plaza Accord, the 1985 agreement among the US, UK, France, Japan and then West Germany to address massive global trade imbalances by devaluing the US dollar. Froman's solution would ask China to strengthen its currency, reduce industrial support and accept verifiable export limits, with trading partners easing their restrictions according to the scale of China's compliance.

Froman warns that an abrupt loss of foreign demand would destabilize China, yet recommends export restrictions and continued trade pressure. The contradiction is clear: Those measures would help create the very shock he predicts. China's industrial expansion may require adjustment in particular sectors, but the threat does not arise from trade. It arises when governments respond to competitive pressure with tariffs, closed markets and fragmented supply chains, thereby reducing the demand, investment and productivity on which global growth depends.

Froman presents his view as a matter of arithmetic, comparing a more than 20% increase in China's trade surplus in the first two months of 2026 with global economic growth of about 3%. But a trade surplus is not the same as exports. It is the gap between exports and imports, so it can widen without China's overseas sales growing at anything close to the same rate. The comparison assumes that world demand is fixed: If Chinese firms sell more, producers elsewhere must sell less. That assumption is particularly misleading in industries where falling costs and improving technology create new commercial applications and expand demand.

Consider solar power. When cheaper panels reduce the total cost of a power project, investments that were previously uneconomic can become viable, creating additional demand for installation, storage, grid equipment, financing and maintenance. Batteries follow the same pattern. Lower battery costs make electric vehicles more affordable, but they also enable grid storage, backup power for data centers, distributed power systems and other applications that were not commercially viable at earlier prices. In such industries, supply does not merely compete for existing demand; improvements in price and performance help create new demand.

This is also the logic behind China's manufacturing upgrade. Adjustment does not have to mean simply producing less until supply fits today's market. It can mean producing differently: improving technology, reducing costs, developing better products and making new applications commercially feasible.

In the first seven months of 2026, China's output of 3D-printing equipment, lithium-ion batteries and industrial robots rose by 52.3%, 40.2% and 28.5%, respectively. These products are not merely final goods competing for existing consumer spending. An affordable industrial robot can make automation viable for a smaller factory. Cheaper storage can support additional renewable generation, grid balancing and distributed power systems. Better batteries can stimulate investment in charging networks, power electronics, software and mobility services. Each technology creates demand for complementary capital, skills and services.

The economic dynamic extends beyond China. Lower-cost machinery, energy equipment and industrial components can reduce the capital required for factories, power systems and infrastructure in other countries. Affordable lithium iron phosphate batteries, for example, have helped electric vehicles move beyond the largest advanced economies and into a wider range of emerging markets. Importing a less expensive piece of equipment can enable a local firm to enter a market, expand production or adopt a technology that was previously out of reach. Chinese exports therefore do not merely compete with existing production; many become inputs into production elsewhere.

China also supports world demand from the other side of the trade ledger. In the first half of 2026, China's goods imports rose by 22.1%, faster than the 13.4% increase in exports. China buys commodities, intermediate goods, capital equipment, services and consumer products from around the world. A major contraction in Chinese demand would hurt many exporters precisely because China is one of their largest markets. Describing China only as a source of excess supply therefore misses half of the relationship: Its imports also sustain production and employment abroad.

These trade figures show why "overcapacity" cannot be inferred from exports or trade surpluses alone. A trade surplus is a macroeconomic outcome influenced by economy-wide saving and investment as well as international specialization, whereas excess capacity is an industry-level condition. Subsidies, low prices and strong exports may warrant scrutiny, but none is by itself decisive evidence of overcapacity.

Pressure on incumbent producers is also not proof that Chinese manufacturing reduces global welfare. A report by the Deutsche Bundesbank, Germany's central bank, shows that Chinese competition is only part of the explanation for Germany's export weakness: Weak demand for key German products, energy costs, supply-chain disruptions, an unfavorable export mix and broader competitiveness problems have also mattered. Treating Chinese output as the sole cause therefore shifts attention away from weaknesses that are partly domestic. Lower-priced imports can impose real pressure on established manufacturers while reducing costs for consumers and downstream businesses; a balanced assessment must account for both.

The more immediate global risk arises when governments try to prevent that evolution through trade restrictions. Restrictive trade policies intensified sharply in early 2026. In January-May, the World Trade Organization-International Monetary Fund measure of trade policy activity averaged nearly twice its 2024 level, with tariff increases, import bans and quantitative restrictions driving most of the rise. Such policies raise the cost of consumer goods and industrial inputs, force companies to duplicate factories across political blocs, weaken economies of scale and make businesses more reluctant to invest when future market access is uncertain.

A sudden worldwide closure to Chinese production is neither costless nor the most likely outcome. A joint venture between China's CATL, a global leader in renewable energy technology innovation, and automaker Stellantis in Spain is expected to create more than 4,000 direct jobs. Chinese new energy vehicle manufacturer BYD reported that its manufacturing complex in Brazil had produced 100,000 electrified vehicles and employed 5,500 direct workers by July 2026. Local production, joint ventures and supplier partnerships allow importing economies to capture more employment and value while continuing to benefit from Chinese technology. Market access is not a binary choice between unrestricted imports and complete exclusion.

These adjustment channels are precisely why the crisis scenario is less plausible than Froman suggests. Export growth can slow, firms can consolidate, production can move closer to customers, and new applications can expand demand. None of these outcomes resembles the abrupt disappearance of markets on which the warning depends.

Nor does slower trade automatically produce a global financial crash. The 2008 crisis spread because mortgage-related losses were amplified through highly leveraged and interconnected financial institutions and markets. Manufacturing overcapacity and exports, by themselves, do not create the same cross-border chain of leveraged financial claims. Protectionism could slow trade, raise prices and weaken growth, but it would not make Chinese manufacturing the cause of a 2008-style crisis.

That distinction matters when judging the proposed remedy. Froman's proposal is not a neutral program for global stability. It would replace rules-based trade with an asymmetric form of managed trade in which major importing economies set an acceptable ceiling on Chinese production and exports.

There are two very different readings of China's industrial rise. One treats each increase in Chinese production as additional supply pressing against a fixed pool of world demand. The other recognizes that better batteries, cheaper clean-energy equipment, more capable robots and other advanced products can lower costs, open new uses and stimulate investment far beyond China. The first view leads naturally to export limits and smaller markets. The second points toward competition, local production and shared growth.

Elements of this more productive approach are already visible in China's manufacturing upgrade and the spread of overseas partnerships. China can continue improving capital allocation, strengthening competition and allowing inefficient firms to exit. These are ways to raise productivity, not emergency measures to shrink manufacturing for the benefit of foreign competitors. Other economies can invest in their own productivity and capture more of the value created by Chinese technology through local production, joint ventures, licensing and common standards. Such arrangements preserve competition while allowing technology, capital, local labor and suppliers to reinforce one another.

The choice between these approaches therefore matters for the world economy. If innovation lowers costs and creates new applications, the response should be to spread those gains through competition and cooperation, not to force production into yesterday's markets. Ultimately, the greater danger lies not in China's capacity to produce, but in policies that make markets smaller, supply chains less efficient and sustained growth more difficult.

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