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Xinyi Wu

China’s Ministry of Commerce has released a document rebutting claims of Chinese overcapacity, arguing that its industrial output is not a result of subsidies and insufficient domestic demand, but is instead driven by innovation and reform.
“There is no necessary connection between industrial subsidies and overcapacity,” the ministry said in the position paper published on Tuesday.
Many countries adopt subsidies in pursuit of their developmental needs, the document added, citing Washington’s US$750 billion Inflation Reduction Act of 2022 and the estimated €1.44 trillion in subsidies planned by the European Commission between 2021 and 2030.
Beijing said its own subsidy mechanisms aligned with World Trade Organization rules, adding that authorities had taken “specific measures to clean up and regulate certain non-compliant practices in some localities”.
The position paper comes as China faces mounting pushback from major trading partners, who contend that Beijing’s extensive support – across sectors such as electric vehicles, solar panels and steel – has artificially lowered costs and driven industrial overcapacity.
With domestic consumption remaining subdued, this excess output has often been diverted into export markets, pushing China’s trade surplus to a record US$1.2 trillion in 2025.
The commerce ministry, however, also rejected the link between insufficient domestic demand and overcapacity, framing weak consumption as a temporary feature of China’s broader economic transition.


“China has never deliberately pursued a trade surplus,” it added in the position paper, adding that its strong export growth stemmed from its economies of scale and innovation capabilities.
“From a long-term perspective, China’s consumption market remains vast … and its role as the main driver of growth will become even more prominent,” said Lin Weilong, director of the ministry’s policy research office, at a press conference on Tuesday.
As a major consumer market, China’s middle-income population is set to grow to more than 800 million people over the next decade, Lin noted.
In response to the rising trade imbalances, the European Union has launched a wave of trade measures against China. In recent weeks, it has opened an anti-dumping investigation into imports of Pekin ducks from China and imposed duties on Chinese car and truck tyres, as well as threatened much wider tariff measures.
Lin called the EU’s trade actions – as well as the United States’ ongoing Section 301 investigations into claims of overcapacity in China and several other markets – “unfounded accusations” and “unilateral restrictive measures”.
“China is not the root cause of the EU’s trade and economic problems, but rather a partner in solving them,” Lin said.
The EU has also “hyped up the so-called issue of the renminbi exchange rate”, Lin said, referring to accusations that China is keeping the yuan artificially undervalued to drive its exports.
“China is a responsible major power and will not seek a competitive advantage through currency devaluation,” he added, noting that Chinese manufacturing was internationally competitive and that there was no need to promote exports through currency undervaluation.


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Beijing says it ‘never deliberately pursued a trade surplus’ and that its strong exports are driven by innovation, not subsidies or overcapacity


Beijing says it ‘never deliberately pursued a trade surplus’ and that its strong exports are driven by innovation, not subsidies or overcapacity.


China pushes back against Western overcapacity claims in new document

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Beijing says it ‘never deliberately pursued a trade surplus’ and that its strong exports are driven by innovation, not subsidies or overcapacity

Beijing says it ‘never deliberately pursued a trade surplus’ and that its strong exports are driven by innovation, not subsidies or overcapacity