Recent visits by American officials to the Chinese mainland, including Secretary of the Treasury Janet Yellen and Secretary of State Antony Blinken, have raised concerns about China’s supposed \”overcapacity,\” particularly in the clean energy sector. However, these concerns may be based on misconceptions that overlook the realities of global trade and China’s role in advancing green technology.
Understanding the Overcapacity Claim
Statistics tell a different story from the overcapacity narrative. According to the China Association of Automobile Manufacturers, in the first quarter of 2024, China produced approximately 2.12 million new energy vehicles (NEVs) and sold around 2.09 million units. Notably, only 14.7% of these were exported, with the vast majority consumed domestically.
In contrast, countries like Germany export nearly 80% of their automobile production, while Japan and the United States export about 50% and 20%, respectively. Furthermore, Chinese NEV exports to the U.S. were valued at only $368 million in 2023, compared to the European Union’s $7.4 billion in exports to the U.S.
Global Trade and Market Dynamics
Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, highlights the flawed logic in the overcapacity argument: \”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.\”
In an interconnected world, it is natural for manufacturers to develop both domestic and international markets. Companies from all nations have the right to compete fairly on the global stage, leveraging their strengths to meet international demand.
The Real Issue: Competitiveness Over Protectionism
China’s competitiveness in the green energy sector stems from early investment in research and development, technological advancements, an extensive network of supporting industries, a vast domestic market, and abundant human resources. These factors have propelled China’s NEV industry to the forefront of innovation and efficiency.
Meanwhile, the United States and several European countries have introduced substantial subsidies for their clean energy industries. The U.S. Inflation Reduction Act, for instance, allocates approximately $369 billion in tax incentives and subsidies for sectors including electric vehicles.
Chinese Ambassador to the U.S., Xie Feng, aptly noted, \”Globally, green capacity is not excessive, but in dire scarcity. The problem now is not ‘overcapacity,’ but ‘over-anxiety.’\” A Bloomberg report echoed this sentiment, stating that \”The issue for advanced economies appears to be more that Chinese companies are more efficient rather than loaded with excess capacity.\”
Opportunities for Global Growth
For developing countries and emerging markets, China’s growth in green manufacturing offers significant opportunities. Projects like the Al Dhafra PV2 Solar Power Plant in Abu Dhabi, built by Chinese companies, enhance energy security while promoting sustainable development. Additionally, Chinese firms like BYD are establishing factories in countries such as Brazil and Uzbekistan, creating jobs and fostering local green industry ecosystems.
Embracing Collaboration Over Competition
The focus should shift from unfounded overcapacity allegations to fostering global collaboration in green technology. By working together, countries can address the pressing challenges of climate change and promote sustainable economic growth worldwide.
Reference(s):
cgtn.com
