The West’s Apartheid Approach towards China’s Overcapacity

The burgeoning production of electric vehicles and the advancement of sustainable technologies in China have emerged as pivotal issues in the evolving trade dynamics between China and the United States.

The burgeoning production of electric vehicles and the advancement of sustainable technologies in China have emerged as pivotal issues in the evolving trade dynamics between China and the United States. This was underscored during the five-day sojourn of U.S. Treasury Secretary Janet Yellen. The strategic timing of her visit, followed closely by Secretary of State Antony Blinken’s second trip to China within a year, reignited discussions on a multitude of pressing topics. These included the intricate China-Russia relations and the contentious approval of an $8 billion military aid package to Taiwan. Such developments have rekindled debate among high-level officials of both nations, signaling a potential inflection point in their bilateral trade relations.

In a candid exchange with Reuters, U.S. Treasury Secretary Janet Yellen voiced concerns over China’s burgeoning industrial prowess. She argued that China’s overproduction and expansive industrial capabilities pose a significant challenge not just to the United States, but also to manufacturing sectors across Europe, Japan, India, and Mexico. The crux of the issue lies in the substantial government subsidies that China provides, fostering an enormous excess in production capacity. This is particularly evident in critical industries like renewable energy and electric vehicles, where such subsidies afford Chinese firms a disproportionate economic edge, allowing them to dominate global markets with relative ease. Moreover, Yellen highlighted the potential perils of this trend: an overconcentration of supply chains that could jeopardize the global economy’s agility. She firmly stated that the international community would not condone such policies and warned that the U.S., alongside its allies, is prepared to explore all avenues to counteract what she termed as China’s industrial overcapacity.

During a press conference marking the conclusion of Secretary of State Antony Blinken’s three-day visit to China, the recurring theme of economic fairness was revisited. Blinken criticized the Chinese government’s economic practices, particularly the allocation of substantial industrial subsidies to production sectors. He contended that such policies have precipitated a surge in ‘production inflation’ and unleashed a deluge of inexpensive Chinese products onto global markets. Drawing parallels to past experiences, he cautioned that this pattern could lead to the shuttering of factories and job losses in the United States. Reinforcing the stance taken by Treasury Secretary Janet Yellen, Blinken affirmed that the U.S. is prepared to take decisive action to avert such an undesirable outcome.

The perception that China represents a dual threat—militarily and economically—has gained traction among U.S. politicians and public opinion. This view is fueled by China’s aggressive pricing of eco-friendly products, including electric vehicles, lithium batteries, and solar panels, which positions China as a formidable competitor on the global stage. The trade group Alliance for American Manufacturing underscored this sentiment in their February report, expressing astonishment at the rock-bottom pricing of BYD’s electric SUVs. The report casts the burgeoning Chinese automotive sector as a critical threat to the very existence of American car manufacturers, highlighting the urgent need for strategic responses to this challenge.

The discourse surrounding China’s economic strategies has permeated the realm of election campaigns in the United States, particularly in the lead-up to this year’s Presidential election. During a recent rally in Ohio, former President Trump leveled allegations against China, claiming it seeks to circumvent a 25 percent U.S. tariff by routing car exports through Mexico, which enjoys a free trade agreement with the United States. He cautioned voters, suggesting that a victory for President Biden in the upcoming election could spell disaster for the American automotive sector, using stark language to emphasize the potential impact on industry jobs and production.

The implications of China’s industrial strategy extend well beyond the US borders. The International Energy Agency, headquartered in Paris, reports that a decade of sustained subsidies to the auto industry has enabled China to command approximately 60% of the global electric vehicle market. This dominance is attributed to the robustness of China’s automotive sector. Industry analysts estimate that Chinese manufacturers produce about 10 million electric vehicles in excess of domestic demand annually, compelling them to seek out international markets for the surplus. There is a palpable concern that the vigor characterizing China’s tech and eco-friendly sectors—exemplified by solar panel and battery production—may propel Chinese enterprises to expand their foothold in as many overseas markets as possible, potentially reshaping the global economic landscape.

Evidence is mounting that counters the prevailing Western narrative of China’s supposed surplus in industrial production capacity. This concept of surplus is inherently tied to demand, and without it, the notion lacks substance. In reality, global estimates suggest that the green industry is not suffering from excess capacity at all. Forecasts by the International Energy Agency indicate that by 2030, the global demand for new energy vehicles and photovoltaic energy production is expected to surge to 45 million units and 820 GW, respectively—representing increases of 4.5 and 4 times over the figures from 2022. Given that the new energy sector is still in its infancy and brimming with potential, it’s evident that global capacity falls short of market demand. This raises the question: from where does the allegation of excess capacity originate?

The debate over what constitutes excess capacity in the automotive industry presents a curious dichotomy. While Germany’s export of 80% of its car production, followed by Japan’s 50% and the US’s 25%, escapes the label of excess capacity, China’s export of a mere 12% of its electric vehicles is scrutinized as such. Last year, China produced 9.5 million electric vehicles, with approximately 90% serving its domestic market, underscoring the nation’s prioritization of local demand. Contrary to Western assertions, China does not possess the surplus production capacity to meet the escalating global demand for electric cars. Similarly, 80 to 90 percent of China’s wind turbine output is consumed domestically, reflecting a broader trend across the clean energy sector where production is closely aligned with internal market requirements. This nuanced understanding challenges the oversimplified narrative of overcapacity and highlights the complexities of global trade and production dynamics.

The recurring term ‘overcapacity’ in discussions by Western statesmen and media regarding China should be viewed as the latest chapter in Washington’s multifaceted critique of Beijing, a narrative deeply rooted in political, security, and economic considerations. This rhetoric serves to politicize and securitize trade and economic matters, crafting a discourse that casts China in a light of isolation and risk, while reimagining the G7 as a fiscal counterpart to NATO. Amidst a resurgence of great power rivalry, the Biden administration’s strategy appears to be aimed at constraining China’s influence to safeguard and rejuvenate a liberal international order led by the United States. Thus, the notion of China’s ‘overcapacity’ emerges as a strategic extension of the US’s broader geopolitical narrative.

Peter Rodgers
Peter Rodgers
My name is Peter Rodgers and I am a writer here and there on this and that. But I am particularly keen on the United States' foreign policy. I follow all the news and developments regarding the United States relations with Europe, Middle East, and the Indo-Pacific region and my writings have appeared on websites like responsiblestatecraft.org. Currently, I spend most of my time reading and sometimes writing. When I am not reading and writing, I either watch basketball or play basketball. I was born and raised in Canada where I am currently based but I am very much interested in traveling the world and actually see the countries that I am reading and writing about. I did my degree in international relations at Penn States University. You can find me at conferences and events about United States foreign policy and international relations.