Opinion

The real reason for US, EU complaints about Chinese overcapacity

They are defensive because China threatens their dominance in advanced manufacturing, but fail to see how Chinese manufacturing helps the global energy transition and benefits Global South consumers

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Zhou Xiaoming is a senior fellow at the Centre for China and Globalisation in Beijing and a former deputy representative of China’s Permanent Mission to the United Nations Office in Geneva.

Published: 5:30am, 15 Mar 2024

Washington and Brussels have, of late, been castigating China for what they claim is industrial overcapacity. Brussels is investigating China’s electric vehicle (EV) industry while Washington has threatened to act against China if it tries to “dump” its goods in international markets.

In their attacks, Washington and Brussels define “overcapacity” as a productive capacity that exceeds domestic demand. This narrow definition would make Adam Smith turn in his grave.

Exports normally happen when there is a surplus of goods after meeting domestic demand. All exports are thus the result of overcapacity. If nations could only produce enough to satisfy domestic markets, there would be no cross-border trade.

For centuries, the West has relentlessly pursued market access for their surplus goods. Imperial Britain even resorted to gunboats to open up China to its products, including opium, in the 1840s. Indeed, disposing of surplus products is an important feature of the West’s wealth creation. It is largely what has made the West rich and what will keep it prosperous.