The View

Western protectionism will fail – China’s success isn’t down to subsidies

Complaints of Chinese overcapacity and dumping may be useful in justifying US, EU subsidies and trade barriers but China’s success is really due to its innovation and scale

The strategy will only lead these high-cost Western economies to pay the price with slower growth and higher indebtedness down the road

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Electric cars are lined up for export at Taicang Port in Suzhou, in China’s eastern Jiangsu province, on April 16. The West did not complain about China’s overcapacity in the past because it was good for them. It’s a different picture now. Photo: AFP

Dr Andy Xie is a Shanghai-based independent economist specialising in China and Asia, and writes, speaks and consults on global economics and financial markets.

Published: 3:30pm, 24 Apr 2024

The global economy is moving further towards a world of two prices as the West prop up their green technological industries with subsidies and protectionist tariffs against the cheaper products made by the Global South.

The protectionism of the United States and the European Union is likely to spread to other emerging industries, such as small modular nuclear reactors, and even to high-value sectors like aviation or shipbuilding.

But this strategy will only lead these high-cost Western economies to pay the price with slower growth and higher indebtedness down the road. Meanwhile, the Global South, with its lower costs, will enjoy faster growth and healthier finances.

US Treasury Secretary Janet Yellen has just been to China to complain about its overcapacity, subsidies and dumping in the global market. Plainly, this attack is aimed at justifying America’s use of subsidies and tariffs as well as non-tariff barriers to protect its nascent green tech industry.