Introduction
As global leaders grapple with climate change and the urgent need for a green transformation, questions have arisen about China’s role in the clean energy sector. Recent visits to China by U.S. Treasury Secretary Janet Yellen and German Chancellor Olaf Scholz highlighted concerns over China’s alleged \”overcapacity\” in clean energy products. But does China really have an excess of clean energy products, or is this a myth that needs debunking?
Understanding Capacity Utilization
Capacity utilization rate—a key metric indicating how fully an economy’s productive capacity is being used—offers valuable insights. According to the National Bureau of Statistics, the Chinese mainland’s industrial capacity utilization rate stood at 75.9 percent in the fourth quarter of 2023. In comparison, data from the U.S. Federal Reserve shows that the United States had a utilization rate of 78.8 percent during the same period. With 80 percent generally considered a normal rate, both countries appear to be operating within typical bounds, challenging the notion of excessive overcapacity in China.
The Reality of China’s Clean Energy Production
Examining China’s production and export of new energy vehicles (NEVs) further clarifies the situation. In 2023, Chinese automakers manufactured 30.261 million vehicles, including 9.587 million NEVs. While significant, this number is comparable to the production figures of global automotive giants like Japan’s Toyota and Germany’s Volkswagen Group. Moreover, China exported 4.91 million vehicles that year, with conventional petrol vehicles accounting for 75.5 percent and NEVs comprising 24.5 percent of exports.
Contrary to claims of flooding the global market, China’s clean technology products, such as electric vehicles, solar panels, and lithium-ion batteries, represented only about 4.5 percent of the nation’s total exports in 2023. In fact, revenue from exporting these goods was less than that from traditional export items like suitcases, furniture, and toys.
Global Demand and Comparative Advantage
With the world facing pressing climate challenges, the demand for clean energy products is far from saturated. In November 2023, China and the United States jointly agreed to work towards tripling global renewable energy capacity by 2030, underscoring the immense need for expansion in this sector.
Chinese Premier Li emphasized that moderate production exceeding current demand fosters market competition and drives innovation. China’s advancements in the new energy industry have been achieved through self-improvement and robust market competition, rather than reliance on government subsidies. This approach aligns with the economic principle of comparative advantage, where countries focus on producing goods at lower costs and importing others for mutual benefit.
The Market Competition Perspective
Some experts suggest that concerns over China’s clean energy production stem more from market competition than actual overcapacity. As Brazilian scholar Marco Fernandes noted, \”The U.S. and the EU also subsidize their companies and industries, and it’s part of the game. But China seems like the only one taking the blame. This double standard is all about market competition.\”
Conclusion
In light of global efforts to combat climate change, China’s role in producing affordable clean energy products contributes significantly to both national and international carbon reduction goals. The data indicates that rather than causing harm through overcapacity, China’s clean energy sector is meeting growing global demand and stimulating healthy market competition.
Reference(s):
Analysis: Does China really have excess clean energy products?
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